First US Bancshares (NASDAQ:FUSB) Is Increasing Its Dividend To $0.05
The board of First US Bancshares, Inc. (NASDAQ:FUSB) has announced that it will be paying its dividend of $0.05 on the 2nd of October, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.3%, which is below the industry average.
See our latest analysis for First US Bancshares
First US Bancshares' Payment Expected To Have Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.
First US Bancshares has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Using data from its latest earnings report, First US Bancshares' payout ratio sits at 13%, an extremely comfortable number that shows that it can pay its dividend.
Looking forward, earnings per share could rise by 29.3% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the future payout ratio could be 13% by next year, which is in a pretty sustainable range.
First US Bancshares Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of $0.04 in 2014 to the most recent total annual payment of $0.20. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. First US 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
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. First US Bancshares has seen EPS rising for the last five years, at 29% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like First US Bancshares' Dividend
Overall, a dividend increase is always good, and we think that First US Bancshares is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for First US Bancshares that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
