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

First Financial Bankshares, Inc. (NASDAQ:FFIN) will increase its dividend from last year's comparable payment on the 3rd of April to $0.17. Even though the dividend went up, the yield is still quite low at only 1.8%.

Check out our latest analysis for First Financial Bankshares

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.

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. Past distributions do not necessarily guarantee future ones, but First Financial Bankshares' payout ratio of 40% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 7.7%. Analysts estimate the future payout ratio will be 45% 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 an extended history of paying stable dividends. Since 2013, the dividend has gone from $0.24 total annually to $0.68. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. 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 13% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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. 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.