First United (NASDAQ:FUNC) Is Increasing Its Dividend To $0.20
First United Corporation (NASDAQ:FUNC) will increase its dividend from last year's comparable payment on the 1st of May to $0.20. This makes the dividend yield 4.7%, which is above the industry average.
View our latest analysis for First United
First United's Payment Expected To Have Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
First United has a good history of paying out dividends, with its current track record at 5 years. Using data from its latest earnings report, First United's payout ratio sits at 16%, an extremely comfortable number that shows that it can pay its dividend.
If the trend of the last few years continues, EPS will grow by 45.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the future payout ratio could be 15% by next year, which is in a pretty sustainable range.
First United Is Still Building Its Track Record
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. Since 2018, the annual payment back then was $0.36, compared to the most recent full-year payment of $0.80. This means that it has been growing its distributions at 17% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that First United has been growing its earnings per share at 45% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We Really Like First United's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for First United that investors need to be conscious of moving forward. Is First United not quite the opportunity you were looking for? Why not check out our selection of top 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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