The board of FB Financial Corporation (NYSE:FBK) has announced that it will be increasing its dividend by 15% on the 21st of February to $0.15, up from last year's comparable payment of $0.13. Although the dividend is now higher, the yield is only 1.4%, which is below the industry average.
FB Financial's Dividend Forecasted To Be Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.
FB Financial 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 17% also shows that FB Financial is able to comfortably pay dividends.
The next 3 years are set to see EPS grow by 26.8%. Analysts estimate the future payout ratio will be 19% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
FB Financial Is Still Building Its Track Record
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2018, the annual payment back then was $0.24, compared to the most recent full-year payment of $0.52. This means that it has been growing its distributions at 17% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
FB Financial Could Grow Its Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. FB Financial has seen EPS rising for the last five years, at 7.0% per annum. FB Financial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Our Thoughts On FB Financial's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for FB Financial that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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