The board of First Interstate BancSystem, Inc. (NASDAQ:FIBK) has announced that it will pay a dividend of $0.47 per share on the 20th of February. This means the annual payment is 5.3% of the current stock price, which is above the average for the industry.

First Interstate BancSystem's Earnings Will Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained.

First Interstate BancSystem has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on First Interstate BancSystem's last earnings report, the payout ratio is at a decent 64%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to fall by 0.4%. However, as estimated by analysts, the future payout ratio could be 61% over the same time period, which we think the company can easily maintain.

First Interstate BancSystem Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2016, the annual payment back then was $0.80, compared to the most recent full-year payment of $1.88. This means that it has been growing its distributions at 8.9% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

First Interstate BancSystem May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 3.3% per annum over the last five years, which admittedly is a bit slow. First Interstate BancSystem is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

First Interstate BancSystem Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think First Interstate BancSystem might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. 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.