First Financial Bankshares (NASDAQ:FFIN) Has Announced That It Will Be Increasing Its Dividend To US$0.17

The board of First Financial Bankshares, Inc. (NASDAQ:FFIN) has announced that it will be increasing its dividend by 13% on the 1st of July to US$0.17. This takes the annual payment to 1.5% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for First Financial Bankshares

First Financial Bankshares' Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, First Financial Bankshares was easily earning enough to 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. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, 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 an extended history of paying stable dividends. The dividend has gone from US$0.24 in 2012 to the most recent annual payment of US$0.60. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. 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

Investors could be attracted to the stock based on the quality of its payment 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. With a decent amount of growth and a low payout ratio, we think this bodes well for First Financial Bankshares' prospects of growing its dividend payments in the future.

We Really Like First Financial Bankshares' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for First Financial Bankshares for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.