Business First Bancshares, Inc.'s (NASDAQ:BFST) investors are due to receive a payment of $0.15 per share on 15th of February. This payment means the dividend yield will be 2.2%, which is below the average for the industry.

Business First Bancshares' Earnings Will Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive.

Having paid out dividends for 8 years, Business First Bancshares has a good history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 21% also shows that Business First Bancshares is able to comfortably pay dividends.

Looking forward, EPS is forecast to rise by 26.8% over the next 3 years. The future payout ratio could be 19% over that time period, according to analyst estimates, which is a good look for the future 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. The dividend has gone from an annual total of $0.32 in 2018 to the most recent total annual payment of $0.60. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. 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.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Business First Bancshares has seen EPS rising for the last five years, at 8.8% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Business First Bancshares' prospects of growing its dividend payments in the future.

An additional note is that the company has been raising capital by issuing stock equal to 11% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Business First Bancshares Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Business First Bancshares might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.