First Financial Bankshares (NASDAQ:FFIN) Is Paying Out A Larger Dividend Than Last Year

By
Simply Wall St
Published
November 05, 2021
NasdaqGS:FFIN
Source: Shutterstock

First Financial Bankshares, Inc. (NASDAQ:FFIN) has announced that it will be increasing its dividend on the 3rd of January to US$0.15. This takes the annual payment to 1.1% 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' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. 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.

EPS is set to fall by 9.4% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 43%, which is comfortable for the company to continue in the future.

historic-dividend
NasdaqGS:FFIN Historic Dividend November 6th 2021

First Financial Bankshares Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the dividend has gone from US$0.23 to US$0.60. This means that it has been growing its distributions at 10% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

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. We are encouraged to see that First Financial Bankshares has grown earnings per share at 16% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

First Financial Bankshares Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that First Financial Bankshares is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for First Financial Bankshares that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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