First Financial Bankshares (NASDAQ:FFIN) Is Increasing Its Dividend To $0.19

First Financial Bankshares, Inc. (NASDAQ:FFIN) has announced that it will be increasing its periodic dividend on the 1st of July to $0.19, which will be 5.6% higher than last year's comparable payment amount of $0.18. Despite this raise, the dividend yield of 2.1% is only a modest boost to shareholder returns.

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First Financial Bankshares' Payment Expected To Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end.

First Financial Bankshares has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 44%, which means that First Financial Bankshares would be able to pay its last dividend without pressure on the balance sheet.

The next year is set to see EPS grow by 7.9%. If the dividend continues along recent trends, we estimate the future payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for First Financial Bankshares

First Financial Bankshares Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.28 in 2015, and the most recent fiscal year payment was $0.72. This means that it has been growing its distributions at 9.9% per annum 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.

First Financial Bankshares Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. First Financial Bankshares has seen EPS rising for the last five years, at 6.4% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like First Financial Bankshares' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for First Financial Bankshares for free with public 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.