Small Regional Bank Doubled Its Dividend

I’m back at it with another company from New Jersey.

I promise it’s not on purpose.

But these companies from the Garden State are simply growing their dividends too fast to ignore.

Now it’s First Bank (ticker: FRBA), a small regional bank serving New Jersey and the Philadelphia area.

The graphic below shows the locations of First Bank’s branches.

First Bank has been growing a lot recently.

Earnings and free cash flow have both risen by 15% each year over the past decade.

The growth is now being passed along to the small bank’s investors.

First Bank raised its dividend to $0.12 per quarter, which is 33% higher than its last payment and double what it paid a year ago.

But you can’t wait too long… you need to own shares in First Bank by November 5 (Thursday) to get the new dividend.

The higher payment also raises its dividend yield to 2.5%, which is the highest it’s been since 2023.

What does First Bank’s historical dividend growth look like?

The regional bank started paying dividends in 2017 and has raised payments sporadically ever since.

What’s the reason for the huge increase in the dividend?

Net interest margin, which can be thought of as the spread between interest earned and interest paid, rose to 3.75% last quarter.

It means First Bank is making more money lending out funds than it pays on its deposits.

And despite the rapid rise in its dividend, it’s still maintaining a safe payout ratio.

Next year, First Bank’s payout ratio is forecasted to only be 25%, which is lower than most other regional banks.

We certainly shouldn't expect the small regional bank to double its dividend every year.

But it has plenty of room to keep those payments rising before its payout ratio gets too high.

And if First Bank can keep raising its free cash flow by 15% each year, then it can still have a sizable dividend growth rate without raising its payout ratio.

One downside is the size.

First Bank is worth just under $500 million.

A lot of investors worry about investing in a company as small as First Bank, especially in the banking sector.

If you’re looking for a larger company, then First Bank isn’t for you.

And there are certainly risks to investing in a smaller regional bank.

However, nobody in banking has grown their dividend faster than First Bank over the past 12 months.

So, give the little guy a shot to see if First Bank should be in your portfolio.

What’s the smallest dividend stock you own?

Michael Jennings

Dividend Stocks Research