First Financial Bankshares' (NASDAQ:FFIN) Upcoming Dividend Will Be Larger Than Last Year's

First Financial Bankshares, Inc. (NASDAQ:FFIN) has announced that it will be increasing 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 2.2%, which is below the industry average.

See our latest analysis for First Financial Bankshares

First Financial Bankshares' Dividend Forecasted To Be Well Covered By Earnings

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

First Financial Bankshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but First Financial Bankshares' payout ratio of 44% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to fall by 4.2%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 51%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

First Financial Bankshares Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.25, compared to the most recent full-year payment of $0.72. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

First Financial Bankshares Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that First Financial Bankshares has grown earnings per share 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.

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 earnings easily cover the company's distributions, and the company is generating plenty of cash. 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 of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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 collection of strong dividend payers.

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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.