Why You Might Be Interested In First Financial Corporation (NASDAQ:THFF) For Its Upcoming Dividend
First Financial Corporation (NASDAQ:THFF) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase First Financial's shares before the 29th of December to receive the dividend, which will be paid on the 16th of January.
The company's upcoming dividend is US$0.45 a share, following on from the last 12 months, when the company distributed a total of US$1.08 per share to shareholders. Last year's total dividend payments show that First Financial has a trailing yield of 2.0% on the current share price of $44.11. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether First Financial can afford its dividend, and if the dividend could grow.
See our latest analysis for First Financial
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. First Financial paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, First Financial's earnings per share have been growing at 18% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. First Financial's dividend payments per share have declined at 0.6% per year on average over the past 10 years, which is uninspiring.
The Bottom Line
Is First Financial an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, First Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 2 warning signs for First Financial (1 is concerning) you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
