First Financial Bankshares (NASDAQ:FFIN) Could Be A Buy For Its Upcoming Dividend

First Financial Bankshares, Inc. (NASDAQ:FFIN) stock is about to trade ex-dividend in four days. Investors can purchase shares before the 15th of December in order to be eligible for this dividend, which will be paid on the 4th of January.

First Financial Bankshares's upcoming dividend is US$0.13 a share, following on from the last 12 months, when the company distributed a total of US$0.52 per share to shareholders. Based on the last year's worth of payments, First Financial Bankshares stock has a trailing yield of around 1.5% on the current share price of $34.91. If you buy this business for its dividend, you should have an idea of whether First Financial Bankshares's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for First Financial Bankshares

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately First Financial Bankshares's payout ratio is modest, at just 38% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see First Financial Bankshares's earnings per share have risen 13% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, First Financial Bankshares has lifted its dividend by approximately 8.7% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is First Financial Bankshares an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, First Financial Bankshares looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

On that note, you'll want to research what risks First Financial Bankshares is facing. Case in point: We've spotted 2 warning signs for First Financial Bankshares you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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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