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FB Financial's (NYSE:FBK) Upcoming Dividend Will Be Larger Than Last Year's

The board of FB Financial Corporation (NYSE:FBK) has announced that it will be paying its dividend of $0.15 on the 23rd of May, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.9%, which is below the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. FB Financial's stock price has reduced by 31% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for FB Financial

FB Financial's Payment Expected To Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive.

FB Financial has established itself as a dividend paying company, given its 5-year history of distributing earnings to shareholders. While past data isn't a guarantee for the future, FB Financial's latest earnings report puts its payout ratio at 15%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS is forecast to fall by 2.4%. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 15%, which would be comfortable for the company to continue in the future.

historic-dividend
historic-dividend

FB Financial Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 5 years was $0.24 in 2018, and the most recent fiscal year payment was $0.52. This means that it has been growing its distributions at 17% per annum over that time. FB Financial 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's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 4.7% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, FB Financial could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for FB Financial (of which 1 doesn't sit too well with us!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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

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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