Over the past 10 years First Financial Bankshares Inc (NASDAQ:FFIN) has returned an average of 2.00% per year from dividend payouts. The stock currently pays out a dividend yield of 1.60%, and has a market cap of US$3.22B. Does First Financial Bankshares tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for First Financial Bankshares
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Is it able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does First Financial Bankshares fare?
The current trailing twelve-month payout ratio for the stock is 41.20%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect FFIN’s payout to fall to 36.66% of its earnings, which leads to a dividend yield of 1.69%. However, EPS should increase to $2.07, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of FFIN it has increased its DPS from $0.43 to $0.76 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock. Compared to its peers, First Financial Bankshares has a yield of 1.60%, which is on the low-side for Banks stocks.
With this in mind, I definitely rank First Financial Bankshares as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three essential aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for FFIN’s future growth? Take a look at our free research report of analyst consensus for FFIN’s outlook.
- Valuation: What is FFIN worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether FFIN is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.