Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that The First Bancorp, Inc. (NASDAQ:FNLC) is about to go ex-dividend in just 3 days. Ex-dividend means that investors that purchase the stock on or after the 4th of October will not receive this dividend, which will be paid on the 22nd of October.
First Bancorp's next dividend payment will be US$0.3 per share, and in the last 12 months, the company paid a total of US$1.2 per share. Looking at the last 12 months of distributions, First Bancorp has a trailing yield of approximately 4.4% on its current stock price of $27.46. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether First Bancorp can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. First Bancorp paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see First Bancorp's earnings per share have risen 14% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past ten years, First Bancorp has increased its dividend at approximately 4.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because First Bancorp is keeping back more of its profits to grow the business.
The Bottom Line
Has First Bancorp got what it takes to maintain its dividend payments? Earnings per share are growing nicely, and First Bancorp is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Overall, First Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious about whether First Bancorp has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.