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The board of First Guaranty Bancshares, Inc. (NASDAQ:FGBI) has announced that it will pay a dividend of US$0.16 per share on the 30th of June. The dividend yield is 2.2% based on this payment, which is a little bit low compared to the other companies in the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that First Guaranty Bancshares' stock price has increased by 34% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for First Guaranty Bancshares
First Guaranty Bancshares' Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, First Guaranty Bancshares' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 5.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.
First Guaranty Bancshares Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2012, the first annual payment was US$0.40, compared to the most recent full-year payment of US$0.64. This implies that the company grew its distributions at a yearly rate of about 4.9% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that First Guaranty Bancshares has grown earnings per share at 13% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for First Guaranty Bancshares' prospects of growing its dividend payments in the future.
First Guaranty Bancshares Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think First Guaranty Bancshares might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.