First Financial Bankshares' (NASDAQ:FFIN) Dividend Will Be Increased To US$0.17

First Financial Bankshares, Inc.'s (NASDAQ:FFIN) dividend will be increasing on the 1st of July to US$0.17, with investors receiving 13% more than last year. Even though the dividend went up, the yield is still quite low at only 1.5%.

See our latest analysis for First Financial Bankshares

First Financial Bankshares' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, First Financial Bankshares' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 0.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.

First Financial Bankshares Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the first annual payment was US$0.24, compared to the most recent full-year payment of US$0.60. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see First Financial Bankshares has been growing its earnings per share at 15% a year over the past five years. First Financial Bankshares definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

First Financial Bankshares Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 6 First Financial Bankshares analysts we track are forecasting continued growth with our free report on 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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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.