First BanCorp’s Rising Dividend Hinges Entirely on Puerto Rico’s Economy
FirstBank has raised its dividend four times in five years, but nearly every loan on its books ties back to a single Caribbean island economy with a growing pile of auto delinquencies and volatile government deposits.
First BanCorp (NYSE:FBP) has raised its dividend three years running, and every one of those payments depends on the economy of one Caribbean island. FirstBank lends mainly in Puerto Rico and runs smaller operations in Florida and the U.S. and British Virgin Islands. The bank’s geographic breakdown puts Puerto Rico at $10.05 billion, compared with $2.55 billion for the United States. A downturn on the island would hit nearly the whole book, and no mainland region is big enough to buffer it.
A Dividend That Keeps Climbing
The quarterly payout was $0.05 in 2020. It rose to $0.14 in 2023, $0.18 in 2025 and $0.20 starting with the February 2026 payment. At $26.51 a share, the stock yields 2.8%. The dividend takes up only about 33% of trailing EPS of $2.36. The left earnings largely fund buybacks. CEO Aurelio Alemán said:
“Our thoughtful and consistent approach to capital deployment resulted in a net payout ratio of 92% during the quarter achieved through share buybacks and dividends.”
Why Capital Strength Equals Dividend Safety
A bank’s dividend needs regulatory support as well as management’s approval. Regulators set minimum capital levels and review payout plans, so how much capital a bank holds determines how much it can pay out. First BanCorp ended the second quarter with a CET1 ratio (core equity measured against risk-weighted assets) of 17% and a tangible common equity ratio of 10.08%. Size limits its flexibility, though. With a market value of roughly $4.05 billion, it lacks the funding options available to a large mainland regional bank.
How Puerto Rico’s Big Three Banks Compare
| Metric | First BanCorp | Popular Inc. (NASDAQ:BPOP | BPOP Price Prediction) | OFG Bancorp (NYSE:OFG) |
|---|---|---|---|
| Dividend yield | 2.8% | 1.89% | 2.55% |
| Return on assets (TTM) | 1.95% | 1.25% | 1.81% |
| Trailing P/E | 11 | 11 | 10 |
| Price-to-book | 2.06x | 1.59x | 1.55x |
Popular and OFG Bancorp depend on the same island economy. First BanCorp offers the highest yield and the highest return on assets of the three. It also trades at the highest multiple of book value, so investors are already paying for that profitability.
Island Risks Investors Cannot Ignore
The local economy looks solid. Unemployment is at 5.7%, companies have announced about $2.2 billion in reshoring projects, and FEMA and HUD funds are still flowing. On the July call, Alemán said:
“Loan growth is accelerating in the second half of the year as business activity in Puerto Rico continues.”
Consumer credit and deposits show weak spots. Retail auto sales were down about 19% year to date as of the Q1 report. In the second quarter, early-stage delinquencies rose about $32.9 million, mainly from a $20.7 million jump in auto finance. Roughly two-thirds of the $274 million deposit increase came from government accounts, which management called volatile. The bank also has $297.5 million in direct Puerto Rico government obligations. Alemán played down the delinquency increase:
“We don’t expect significant upticks from here in those delinquency levels.”
Verdict: The $0.20 Dividend Looks Safe
The dividend looks secure. Because it uses only about a third of earnings and the bank has a 17% CET1 ratio, buybacks would be cut long before the dividend if conditions worsened. The stock is up 31.05% this year, even withstanding a 7.02% drop over the past month. One number to track: net charge-offs fell to 49 basis points in the second quarter from 65 basis points the quarter before. If they climb back above 65 while auto delinquencies keep rising, expect buybacks to shrink in the October capital plan.
Contact [email protected] for any questions or corrections.
Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
