First Financial (NASDAQ:THFF) Is Increasing Its Dividend To $0.56

First Financial Corporation (NASDAQ:THFF) will increase its dividend on the 15th of January to $0.56, which is 9.8% higher than last year's payment from the same period of $0.51. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.

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First Financial's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

First Financial has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 33%, which means that First Financial would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 16.0%. Analysts estimate the future payout ratio will be 30% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for First Financial

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of $0.98 in 2015 to the most recent total annual payment of $2.04. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. First Financial might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. First Financial has seen EPS rising for the last five years, at 10% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for First Financial's prospects of growing its dividend payments in the future.

We Really Like First Financial's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for First Financial that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of 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.