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First Financial Bancorp. (NASDAQ:FFBC) will pay a dividend of US$0.23 on the 15th of September. Based on this payment, the dividend yield on the company's stock will be 4.1%, which is an attractive boost to shareholder returns.
First Financial Bancorp's Earnings Easily Cover the Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by First Financial Bancorp's earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to fall by 1.6%. If the dividend continues along recent trends, we estimate the payout ratio could be 52%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was US$0.40 in 2011, and the most recent fiscal year payment was US$0.92. This implies that the company grew its distributions at a yearly rate of about 8.7% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
We Could See First Financial Bancorp's Dividend Growing
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 impressed us by growing EPS at 7.9% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
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. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for First Financial Bancorp (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
This article by Simply Wall St is general in nature. 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.
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