First Capital’s Dividend Sustainability: A Steady Beacon in a Volatile Market

The financial sector has long been a haven for income-seeking investors, and First Capital, Inc. (NASDAQ: FCAP) continues to prove its mettle in this regard. With its latest quarterly dividend of $0.29 per share, the bank has reaffirmed its commitment to rewarding shareholders—a pledge backed by robust financial health and a track record of prudent growth. For long-term investors, this presents a compelling opportunity to secure steady returns amid market uncertainty.

A Dividend Machine with Room to Grow

First Capital’s dividend declaration on May 22, 2025, marks the continuation of its uninterrupted quarterly payout streak, now at $0.29 per share since early 2025. This follows a 7.4% increase from its 2023 rate of $0.27, signaling management’s confidence in the bank’s earnings power. But what truly stands out is the dividend’s sustainability, supported by a payout ratio of just 30% (calculated using Q1 2025 diluted EPS of $0.97). This leaves ample room for future hikes or unexpected economic headwinds.

The Financials Backing the Dividend

First Capital’s Q1 2025 earnings reveal a bank in strong operational form:
- Net Income Rose 6.7% year-over-year to $3.2 million, driven by a 9.3% jump in net interest income to $9.24 million.
- Net Interest Margin Expanded to 3.34%, up from 3.14% in 2024, reflecting effective asset-liability management.
- Nonperforming Assets Dropped to $4.1 million, down from $4.5 million at year-end 2024, underscoring improving credit quality.
- Cash Reserves Swelled to $116.6 million, a $10.7 million increase from late 2024, bolstering liquidity.

These metrics paint a picture of a financially resilient institution with the capital and earnings to sustain dividends while navigating macroeconomic risks.

Why Long-Term Investors Should Take Note

For income-focused portfolios, First Capital offers a 3.05% forward yield—a standout in an era of low bond returns and volatile equities. The dividend’s three-year CAGR of 3% (from $0.26 to $0.29 per quarter) suggests a strategy of measured, sustainable growth, rather than aggressive overpromising.

Moreover, the bank’s Community Bank Leverage Ratio of 10.61% (well above the 9% regulatory minimum) and $9.5 million allowance for credit losses highlight its conservative risk management. Even as interest expense rose due to higher rates, the bank’s ROE of 11.12% remains competitive, ensuring earnings can support dividends for years.

A Dividend Capture Play for Opportunistic Investors

For those looking to maximize yield, First Capital’s ex-dividend date of June 13, 2025, creates a tactical entry point. Historically, shareholders who buy the stock one day before the ex-dividend date and hold for 3–4 days post-payout can capture a 0.85% yield on cost in a single week—a strategy that compounds over time.

Risks, but Few Red Flags

No investment is risk-free. First Capital’s rising noninterest expenses (up $424,000 in Q1 2025) and tightening interest rate environment could pressure margins. However, its $1.21 billion in total assets and $1.08 billion in deposits provide a solid foundation to weather these headwinds.

The Bottom Line: A Solid Bet on Stability

First Capital isn’t a high-flying growth stock, but it’s precisely that steady-as-she-goes profile that makes it invaluable to long-term investors. With a 30% payout ratio, improving margins, and a 3.05% yield, FCAP offers a rare blend of income and capital preservation. For portfolios seeking ballast in volatile markets, this dividend-paying regional bank deserves serious consideration.

Action Item: Secure shares before the June 13 ex-dividend date to lock in the $0.29 payout—and position yourself for future growth.

Investors should consult their financial advisors before making any investment decisions.