First Financial (NASDAQ:THFF) Will Pay A Larger Dividend Than Last Year At US$0.63

First Financial Corporation's (NASDAQ:THFF) dividend will be increasing on the 14th of January to US$0.63, with investors receiving 19% more than last year. The announced payment will take the dividend yield to 2.6%, which is in line with the average for the industry.

View our latest analysis for First Financial

First Financial's Earnings Easily Cover the Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, First Financial's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 8.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 27%, 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 been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was US$0.94 in 2011, and the most recent fiscal year payment was US$1.06. This means that it has been growing its distributions at 1.2% 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.

We Could See First Financial's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. First Financial has impressed us by growing EPS at 9.8% per year over the past five years. First Financial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like First Financial's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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 of these factors considered, we think this has solid potential as a dividend 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. For example, we've picked out 1 warning sign for First Financial that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list 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.