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It looks like First Financial Corporation (NASDAQ:THFF) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase First Financial's shares on or after the 15th of June, you won't be eligible to receive the dividend, when it is paid on the 3rd of July.
The company's next dividend payment will be US$0.54 per share. Last year, in total, the company distributed US$1.28 to shareholders. Calculating the last year's worth of payments shows that First Financial has a trailing yield of 3.0% on the current share price of $35.7. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether First Financial has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for First Financial
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. First Financial is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, First Financial's earnings per share have been growing at 18% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, First Financial has lifted its dividend by approximately 1.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because First Financial is keeping back more of its profits to grow the business.