First Financial Holding (TWSE:2892) Is Increasing Its Dividend To NT$0.85

First Financial Holding Co., Ltd. (TWSE:2892) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of August to NT$0.85. Based on this payment, the dividend yield for the company will be 2.9%, which is fairly typical for the industry.

See our latest analysis for First Financial Holding

First Financial Holding'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 Financial Holding has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 51%, which means that First Financial Holding would be able to pay its last dividend without pressure on the balance sheet.

EPS is set to fall by 11.9% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 53% over the same time period, which we think the company can easily maintain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of NT$0.886 in 2014 to the most recent total annual payment of NT$0.85. The dividend has shrunk at a rate of less than 1% a year over this period. A company that decreases its dividend over time generally isn't what we are looking for.

We Could See First Financial Holding's Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that First Financial Holding has grown earnings per share at 5.4% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for First Financial Holding (1 is a bit unpleasant!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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