Business First Bancshares (NASDAQ:BFST) Will Pay A Larger Dividend Than Last Year At US$0.12
The board of Business First Bancshares, Inc. (NASDAQ:BFST) has announced that it will be increasing its dividend on the 31st of August to US$0.12. This takes the annual payment to 1.8% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for Business First Bancshares
Business First Bancshares' Payment Has Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. However, Business First Bancshares' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to fall by 11.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 24%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Business First Bancshares Doesn't Have A Long Payment History
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The first annual payment during the last 3 years was US$0.32 in 2018, and the most recent fiscal year payment was US$0.48. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Business First Bancshares has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Business First Bancshares has impressed us by growing EPS at 34% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Business First Bancshares Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Business First Bancshares is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Business First Bancshares you should be aware of, and 1 of them can't be ignored. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
This article by Simply Wall St is general in nature. 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.
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