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First Financial Bankshares' (NASDAQ:FFIN) Dividend Will Be Increased To US$0.15

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The board of First Financial Bankshares, Inc. (NASDAQ:FFIN) has announced that it will be increasing its dividend on the 1st of July to US$0.15. Even though the dividend went up, the yield is still quite low at only 1.0%.

Check out our latest analysis for First Financial Bankshares

First Financial Bankshares' Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, First Financial Bankshares' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 3.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 39%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

historic-dividend
historic-dividend

First Financial Bankshares Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was US$0.23 in 2011, and the most recent fiscal year payment was US$0.60. This means that it has been growing its distributions at 10% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. First Financial Bankshares has impressed us by growing EPS at 15% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for First Financial Bankshares' prospects of growing its dividend payments in the future.

We Really Like First Financial Bankshares' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. To that end, First Financial Bankshares has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.