Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see First Financial Corporation (NASDAQ:THFF) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase First Financial’s shares on or after the 28th of March will not receive the dividend, which will be paid on the 15th of April.
The company’s next dividend payment will be US$0.45 per share, and in the last 12 months, the company paid a total of US$0.90 per share. Based on the last year’s worth of payments, First Financial has a trailing yield of 2.4% on the current stock price of US$37.03. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it’s growing.
See 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 paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it’s a relief to see First Financial earnings per share are up 6.2% per annum over the last five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. First Financial’s dividend payments per share have declined at 0.6% per year on average over the past 10 years, which is uninspiring.
Final Takeaway
Is First Financial an attractive dividend stock, or better left on the shelf? First Financial has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating First Financial more closely.
So while First Financial looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. For instance, we’ve identified 2 warning signs for First Financial (1 shouldn’t be ignored) you should be aware of.
Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s a curated list of interesting stocks that are strong dividend payers.
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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.
