Business First Bancshares, Inc.'s (NASDAQ:BFST) investors are due to receive a payment of $0.14 per share on 28th of February. This means the annual payment will be 2.0% of the current stock price, which is lower than the industry average.

See our latest analysis for Business First Bancshares

Business First Bancshares' Earnings Will Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Business First Bancshares has a good history of paying out dividends, with its current track record at 7 years. While past records don't necessarily translate into future results, the company's payout ratio of 25% also shows that Business First Bancshares is able to comfortably pay dividends.

Over the next 3 years, EPS is forecast to expand by 46.5%. Analysts estimate the future payout ratio will be 21% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Business First Bancshares Doesn't Have A Long Payment History

Business First Bancshares' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2018, the dividend has gone from $0.32 total annually to $0.56. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% a year over that time. Business First Bancshares has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

Business First Bancshares May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 2.5% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Business First Bancshares could always pay out a higher proportion of earnings to increase shareholder returns.

An additional note is that the company has been raising capital by issuing stock equal to 17% 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.

Our Thoughts On Business First Bancshares' Dividend

Overall, we think Business First Bancshares is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Business First Bancshares that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.