First Financial Bankshares' (NASDAQ:FFIN) Shareholders Will Receive A Bigger Dividend Than Last Year

First Financial Bankshares, Inc. (NASDAQ:FFIN) will increase its dividend from last year's comparable payment on the 2nd of October to $0.18. Although the dividend is now higher, the yield is only 2.5%, which is below the industry average.

See our latest analysis for First Financial Bankshares

First Financial Bankshares' Earnings Will Easily Cover The Distributions

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

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 44%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS is forecast to fall by 4.2%. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 51%, which would be comfortable for the company to continue in the future.

First Financial Bankshares Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from $0.25 total annually to $0.72. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

First Financial Bankshares Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. First Financial Bankshares has impressed us by growing EPS at 8.7% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

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 generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. 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. As an example, we've identified 1 warning sign for First Financial Bankshares that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.