First Bancshares, Inc. (NASDAQ: BFSTOn November 30, it will pay a dividend of $0.14. This means that the annual payment will be 2.1% of the current share price, which is lower than the industry average.
See our latest analysis for Business First Bancshares
Business First Bancshares earnings will easily cover distributions
While performance is important, another factor to consider about a company’s dividend is whether current payout levels are feasible.
Business First Bancshares has established itself as a dividend-paying company, given its 7-year history of distributing earnings to shareholders. While past records do not necessarily translate into future results, the company’s payout ratio of 24% also shows that Business First Bancshares is able to comfortably pay dividends.
The next 3 years are set to see EPS grow by 52.7%. The future payout ratio could be 22% in that period of time, according to analysts’ estimates, which is a good view for the future of the dividend.
Business First Bancshares does not have a long payment history
Although the company has paid a consistent dividend for a while, we want to see a few more years before we feel confident with it. As of 2017, the annual payout then was $0.32, compared to the most recent annual payout of $0.56. This implies that the company has grown its distributions at an annual rate of about 8.3% over that period. Business First Bancshares has a nice track record of dividend growth, but we’ll wait until we see a longer track record before we get too confident.
Business First Bancshares may find it difficult to increase the dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at 4.0% annually over the past five years, which is admittedly a bit slow. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase the payout ratio.
An additional note is that the company has raised capital by issuing shares equal to 16% of the shares in circulation in the last 12 months. Regularly doing this can be harmful – it is difficult to grow dividends per share when new shares are regularly created.
In summary
In general, a consistent dividend is a good thing, and we think that Business First Bancshares has the ability to continue this in the future. The payout ratio looks good, but unfortunately the company’s dividend record is not stellar. The dividend looks good, but there have been some problems in the past, so we will be a little cautious.
Companies that have a stable dividend policy are likely to benefit from more investor interest than those that suffer from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors that our readers should know when evaluating a company. For example, we identified 3 warning signs for Business First Bancshares which you should be aware of before investing. Business First Bancshares not the opportunity you were looking for? Why not check out ours The selection of the main dividends.
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