The First Bancshares, Inc. (NASDAQ:FBMS) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 8th of August, you won't be eligible to receive this dividend, when it is paid on the 23rd of August.
First Bancshares's upcoming dividend is US$0.08 a share, following on from the last 12 months, when the company distributed a total of US$0.32 per share to shareholders. Looking at the last 12 months of distributions, First Bancshares has a trailing yield of approximately 1.0% on its current stock price of $32.56. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether First Bancshares has been able to grow its dividends, or if the dividend might be cut.
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 Bancshares has a low and conservative payout ratio of just 13% of its income after tax.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see First Bancshares's earnings per share have risen 17% 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. Since the start of our data, 9 years ago, First Bancshares has lifted its dividend by approximately 14% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Is First Bancshares worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating First Bancshares more closely.
Wondering what the future holds for First Bancshares? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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 email@example.com. 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.