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Business First Bancshares, Inc.'s (NASDAQ:BFST) investors are due to receive a payment of $0.12 per share on 31st of August. Including this payment, the dividend yield on the stock will be 2.3%, which is a modest boost for shareholders' returns.
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. Investors will be pleased to see that Business First Bancshares' stock price has increased by 44% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Business First Bancshares
Business First Bancshares' Payment Expected To Have Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.
Business First Bancshares has established itself as a dividend paying company, given its 5-year history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 19% also shows that Business First Bancshares is able to comfortably pay dividends.
EPS is set to fall by 8.1% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 25%, which we are pretty comfortable with and we think would be feasible on an earnings basis.
Business First Bancshares Is Still Building Its Track Record
It is great to see that Business First Bancshares has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.32 in 2018 to the most recent total annual payment of $0.48. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.
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 Business First Bancshares has been growing its earnings per share at 25% 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.
An additional note is that the company has been raising capital by issuing stock equal to 12% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.