First Financial Bankshares' (NASDAQ:FFIN) Dividend Will Be $0.18

The board of First Financial Bankshares, Inc. (NASDAQ:FFIN) has announced that it will pay a dividend on the 1st of April, with investors receiving $0.18 per share. Despite this raise, the dividend yield of 2.3% is only a modest boost to shareholder returns.

View our latest analysis for First Financial Bankshares

First Financial Bankshares' Earnings Will Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having distributed dividends for at least 10 years, First Financial Bankshares has a long history of paying out a part of its earnings to shareholders. Based on First Financial Bankshares' last earnings report, the payout ratio is at a decent 51%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 17.9%. Analysts estimate the future payout ratio will be 49% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

First Financial Bankshares Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was $0.25, compared to the most recent full-year payment of $0.72. This means that it has been growing its distributions at 11% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

First Financial Bankshares May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 4.6% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 4.6% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

We Really Like First Financial Bankshares' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 5 analysts we track are forecasting for First Financial Bankshares for free with public analyst estimates for the company. Is First Financial Bankshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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