First Financial (NASDAQ:THFF) Will Pay A Dividend Of $0.54

First Financial Corporation's (NASDAQ:THFF) investors are due to receive a payment of $0.54 per share on 3rd of July. This means that the annual payment will be 3.8% of the current stock price, which is in line with the average for the industry.

View our latest analysis for First Financial

First Financial's Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

First Financial has a long history of paying out dividends, with its current track record at a minimum of 10 years. Using data from its latest earnings report, First Financial's payout ratio sits at 20%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, earnings per share is forecast to fall by 6.1% over the next year. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 25%, which would be comfortable for the company to continue in the future.

First Financial Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $0.94 total annually to $1.28. This works out to be a compound annual growth rate (CAGR) of approximately 3.1% a year 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 Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that First Financial has been growing its earnings per share at 18% a 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 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 distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For instance, we've picked out 1 warning sign for First Financial that investors should take into consideration. 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.