First BanCorp. (NYSE:FBP) Passed Our Checks, And It's About To Pay A US$0.07 Dividend

Simply Wall St
·3 min read

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that First BanCorp. (NYSE:FBP) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase First BanCorp's shares before the 25th of August to receive the dividend, which will be paid on the 10th of September.

The company's next dividend payment will be US$0.07 per share. Last year, in total, the company distributed US$0.28 to shareholders. Calculating the last year's worth of payments shows that First BanCorp has a trailing yield of 2.2% on the current share price of $12.56. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether First BanCorp can afford its dividend, and if the dividend could grow.

View our latest analysis for First BanCorp

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 BanCorp paid out just 25% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see First BanCorp has grown its earnings rapidly, up 57% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. First BanCorp has delivered 33% dividend growth per year on average over the past three years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

From a dividend perspective, should investors buy or avoid First BanCorp? Companies like First BanCorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, First BanCorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in First BanCorp for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for First BanCorp that you should be aware of before investing in their shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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