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The board of First US Bancshares, Inc. (NASDAQ:FUSB) has announced that the dividend on 2nd of January will be increased to $0.07, which will be 40% higher than last year's payment of $0.05 which covered the same period. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.
View our latest analysis for First US Bancshares
First US Bancshares' Payment Expected To Have Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end.
First US Bancshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. While past data isn't a guarantee for the future, First US Bancshares' latest earnings report puts its payout ratio at 13%, showing that the company can pay out its dividends comfortably.
Over the next year, EPS could expand by 15.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the future payout ratio could be 14% by next year, which is in a pretty sustainable range.
First US Bancshares Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.04 in 2014, and the most recent fiscal year payment was $0.20. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. First US Bancshares has impressed us by growing EPS at 15% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
First US Bancshares Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for First US Bancshares that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.