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The board of Business First Bancshares, Inc. (NASDAQ:BFST) has announced that it will pay a dividend of $0.12 per share on the 31st of August. The dividend yield is 2.0% based on this payment, which is a little bit low compared to the other companies in the industry.
Business First Bancshares' Earnings Will Easily Cover The Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.
Business First Bancshares is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. While it has a shorter history of paying out dividends, Business First Bancshares' payout ratio of 23% is a great sign for current shareholders, as this means that earnings greatly cover dividends.
Looking forward, EPS is forecast to rise by 55.1% over the next 3 years. Analysts forecast the future payout ratio could be 19% over the same time horizon, which is a number we think the company can maintain.
Business First Bancshares Doesn't Have A Long Payment History
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2018, the annual payment back then was $0.32, compared to the most recent full-year payment of $0.48. This means that it has been growing its distributions at 11% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Business First Bancshares has grown earnings per share 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.
Business First Bancshares Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Business First Bancshares that investors should take into consideration. 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.
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