First Financial Corporation (NASDAQ:THFF) will increase its dividend on the 1st of July to US$0.53. This takes the annual payment to 2.3% of the current stock price, which is about average for the industry.
First Financial's Payment Has Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, First Financial's earnings easily 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 6.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 29%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
First Financial Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from US$0.92 in 2011 to the most recent annual payment of US$1.06. This means that it has been growing its distributions at 1.4% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Has Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that First Financial has grown earnings per share at 7.1% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for First Financial's prospects of growing its dividend payments in the future.
We Really Like First Financial's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for First Financial that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
If you’re looking to trade First Financial, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.