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The board of First Financial Corporation (NASDAQ:THFF) has announced that it will pay a dividend on the 3rd of July, with investors receiving $0.54 per share. 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.
Check out our latest analysis for First Financial
First Financial's Dividend Forecasted To Be Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable.
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 20%, an extremely comfortable number that shows that it can pay its dividend.
EPS is set to fall by 6.1% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 25%, which we are pretty comfortable with and we think would be feasible on an earnings basis.
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. 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. 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 who have held shares in the company for the past few years will be happy with the dividend income they have received. First Financial has impressed us by growing EPS at 18% per 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.
We Really Like First Financial's Dividend
Overall, we like to see the dividend staying consistent, and we think First Financial might even raise payments in the future. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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.