First Financial (NASDAQ:THFF) Will Pay A Larger Dividend Than Last Year At $0.74

First Financial Corporation (NASDAQ:THFF) will increase its dividend from last year's comparable payment on the 13th of January to $0.74. Even though the dividend went up, the yield is still quite low at only 2.3%.

Check out the opportunities and risks within the US Banks industry.

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

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

First Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Using data from its latest earnings report, First Financial's payout ratio sits at 21%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, earnings per share is forecast to fall by 11.6% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 22% over the same time period, which is in a pretty comfortable range.

First Financial Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.94 in 2012 to the most recent total annual payment of $1.08. This implies that the company grew its distributions at a yearly rate of about 1.4% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. First Financial has impressed us by growing EPS at 13% 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

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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 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.