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Why The First Bancshares (FBMS) is a Top Dividend Stock for Your Portfolio

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

The First Bancshares in Focus

Headquartered in Hattiesburg, The First Bancshares (FBMS - Free Report) is a Finance stock that has seen a price change of -15.87% so far this year. The bank holding company is currently shelling out a dividend of $0.17 per share, with a dividend yield of 2.09%. This compares to the Banks - Southeast industry's yield of 2.13% and the S&P 500's yield of 1.52%.

In terms of dividend growth, the company's current annualized dividend of $0.68 is up 17.2% from last year. Over the last 5 years, The First Bancshares has increased its dividend 5 times on a year-over-year basis for an average annual increase of 40.58%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. The First Bancshares's current payout ratio is 23%, meaning it paid out 23% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, FBMS expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.11 per share, which represents a year-over-year growth rate of 2.30%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that FBMS is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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