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Should You Buy Business First Bancshares, Inc. (NASDAQ:BFST) For Its Upcoming Dividend?

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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Business First Bancshares, Inc. (NASDAQ:BFST) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Business First Bancshares' shares before the 12th of August to receive the dividend, which will be paid on the 31st of August.

The company's next dividend payment will be US$0.12 per share. Last year, in total, the company distributed US$0.48 to shareholders. Looking at the last 12 months of distributions, Business First Bancshares has a trailing yield of approximately 2.0% on its current stock price of $24.02. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Business First Bancshares has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Business First Bancshares

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Business First Bancshares is paying out just 17% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Business First Bancshares has grown its earnings rapidly, up 33% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, three years ago, Business First Bancshares has lifted its dividend by approximately 14% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

From a dividend perspective, should investors buy or avoid Business First Bancshares? Companies like Business First Bancshares that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Business First Bancshares appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

On that note, you'll want to research what risks Business First Bancshares is facing. For example, Business First Bancshares has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.