First Capital, Inc. (NASDAQ:FCAP) will increase its dividend on the 26th of September to $0.31, which is 6.9% higher than last year’s payment from the same period of $0.29. This makes the dividend yield about the same as the industry average at 3.0%.
We aren’t too impressed by dividend yields unless they can be sustained over time.
Having distributed dividends for at least 10 years, First Capital has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Capital’s payout ratio of 29% is a good sign as this means that earnings decently cover dividends.
Looking forward, earnings per share could rise by 5.9% 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 29% by next year, which is in a pretty sustainable range.
View our latest analysis for First Capital
The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $0.84, compared to the most recent full-year payment of $1.16. This works out to be a compound annual growth rate (CAGR) of approximately 3.3% a year over that time. Although we can’t deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The company’s investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that First Capital has grown earnings per share at 5.9% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Overall, a dividend increase is always good, and we think that First Capital is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in First Capital in our latest insider ownership analysis. Is First Capital 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.
