First Financial Bankshares' (NASDAQ:FFIN) Dividend Will Be Increased To US$0.15

First Financial Bankshares, Inc. (NASDAQ:FFIN) has announced that it will be increasing its dividend on the 1st of July to US$0.15. Even though the dividend went up, the yield is still quite low at only 1.1%.

Check out our latest analysis for First Financial Bankshares

First Financial Bankshares' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, First Financial Bankshares' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 3.6%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 39%, which is comfortable for the company to continue in the future.

First Financial Bankshares Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from US$0.23 in 2011 to the most recent annual payment of US$0.60. This means that it has been growing its distributions at 10% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see First Financial Bankshares has been growing its earnings per share at 15% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

First Financial Bankshares Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that First Financial Bankshares is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for First Financial Bankshares 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 performing dividend stock.

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