The board of FB Financial Corporation (NYSE:FBK) has announced that it will be paying its dividend of $0.15 on the 5th of September, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.7%.
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 FB Financial's stock price has increased by 34% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
FB Financial's 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.
FB Financial has a good history of paying out dividends, with its current track record at 5 years. While past data isn't a guarantee for the future, FB Financial's latest earnings report puts its payout ratio at 8.6%, showing that the company can pay out its dividends comfortably.
EPS is set to fall by 11.3% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 25% over the same time period, which we think the company can easily maintain.
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. The dividend has gone from an annual total of $0.24 in 2018 to the most recent total annual payment of $0.60. This means that it has been growing its distributions at 20% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 4.8% a year for the past five years, which isn't massive but still better than seeing them shrink. If FB Financial is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, FB Financial has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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.