The board of First Financial Bancorp. (NASDAQ:FFBC) has announced that it will pay a dividend on the 15th of June, with investors receiving US$0.23 per share. This makes the dividend yield 4.6%, which will augment investor returns quite nicely.
First Financial Bancorp's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by First Financial Bancorp's earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to fall by 2.9%. If the dividend continues along recent trends, we estimate the payout ratio could be 48%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was US$0.48 in 2012, and the most recent fiscal year payment was US$0.92. This means that it has been growing its distributions at 6.7% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. First Financial Bancorp might have put its house in order since then, but we remain cautious.
We Could See First Financial Bancorp's Dividend Growing
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. First Financial Bancorp has seen EPS rising for the last five years, at 6.8% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
Our Thoughts On First Financial Bancorp's Dividend
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for First Financial Bancorp that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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.