The board of First Capital, Inc. (NASDAQ:FCAP) has announced that it will pay a dividend of $0.27 per share on the 28th of June. This means that the annual payment will be 3.6% of the current stock price, which is in line with the average for the industry.

View our latest analysis for First Capital

First Capital's Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

First Capital has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on First Capital's last earnings report, the payout ratio is at a decent 30%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS could expand by 5.0% if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

First Capital Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.80, compared to the most recent full-year payment of $1.08. This means that it has been growing its distributions at 3.0% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

First Capital Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. First Capital has impressed us by growing EPS at 5.0% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for First Capital's prospects of growing its dividend payments in the future.

We Really Like First Capital's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. For example, we've picked out 1 warning sign for First Capital that investors should know about before committing capital to this stock. Is First Capital not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.