First Financial Bankshares (NASDAQ:FFIN) Is Increasing Its Dividend To $0.17

The board of First Financial Bankshares, Inc. (NASDAQ:FFIN) has announced that it will be paying its dividend of $0.17 on the 3rd of January, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 1.9% is only a modest boost to shareholder returns.

Our analysis indicates that FFIN is potentially overvalued!

First Financial Bankshares' Earnings Will Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

First Financial Bankshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on First Financial Bankshares' last earnings report, the payout ratio is at a decent 39%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 16.4% over the next 3 years. Analysts forecast the future payout ratio could be 42% over the same time horizon, which is a number we think the company can maintain.

First Financial Bankshares Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.24 in 2012, and the most recent fiscal year payment was $0.68. This means that it has been growing its distributions at 11% 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 could be attracted to the stock based on the quality of its payment history. First Financial Bankshares has seen EPS rising for the last five years, at 14% per annum. First Financial Bankshares definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. However, there are other things to consider for investors when analysing stock performance. 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.