First Foundation (NASDAQ:FFWM) Is Due To Pay A Dividend Of $0.11

First Foundation Inc. (NASDAQ:FFWM) has announced that it will pay a dividend of $0.11 per share on the 16th of February. Based on this payment, the dividend yield will be 2.8%, which is fairly typical for the industry.

Check out our latest analysis for First Foundation

First Foundation's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having paid out dividends for only 4 years, First Foundation does not have much of a history being a dividend paying company. Despite the company's shorter dividend history however, calculating for its payout ratio of 22% shows that First Foundation is able to comfortably pay dividends.

EPS is set to fall by 15.7% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 27% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

First Foundation Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2019, the dividend has gone from $0.20 total annually to $0.44. This means that it has been growing its distributions at 22% per annum over that time. First Foundation has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

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. First Foundation has impressed us by growing EPS at 20% per year over the past five years. First Foundation definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

First Foundation Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for First Foundation (1 is potentially serious!) that you should be aware of before investing. 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.