The board of First Financial Bancorp. (NASDAQ:FFBC) has announced that it will pay a dividend on the 17th of June, with investors receiving $0.23 per share. This makes the dividend yield 4.1%, which will augment investor returns quite nicely.

View our latest analysis for First Financial Bancorp

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

First Financial Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on First Financial Bancorp's last earnings report, the payout ratio is at a decent 37%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 1.9% 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 40%, which would be comfortable for the company to continue in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from $0.94 total annually to $0.92. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. First Financial Bancorp has seen EPS rising for the last five years, at 5.1% per annum. First Financial Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On First Financial Bancorp's Dividend

Overall, we think First Financial Bancorp is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for First Financial Bancorp you should be aware of, and 1 of them makes us a bit uncomfortable. 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.