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First Financial Bancorp. (NASDAQ:FFBC) will increase its dividend from last year's comparable payment on the 16th of September to $0.24. The payment will take the dividend yield to 3.8%, which is in line with the average for the industry.
View our latest analysis for First Financial Bancorp
First Financial Bancorp's Earnings Will Easily Cover The Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Having distributed dividends for at least 10 years, First Financial Bancorp has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 37%, which means that First Financial Bancorp would be able to pay its last dividend without pressure on the balance sheet.
Over the next year, EPS is forecast to expand by 1.5%. If the dividend continues on this path, the future payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $0.94 in 2014 to the most recent total annual payment of $0.96. Dividend payments have been growing, but very slowly over the period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
First Financial Bancorp May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 3.0% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, First Financial Bancorp could always pay out a higher proportion of earnings to increase shareholder returns.
In Summary
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for First Financial Bancorp 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.