The board of First Financial Bancorp. (NASDAQ:FFBC) has announced that it will pay a dividend on the 15th of September, with investors receiving $0.23 per share. Based on this payment, the dividend yield on the company's stock will be 3.9%, which is an attractive boost to shareholder returns.
First Financial Bancorp's Earnings Will Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
Having distributed dividends for at least 10 years, First Financial Bancorp has a long history of paying out a part of its earnings to shareholders. Based on First Financial Bancorp's last earnings report, the payout ratio is at a decent 43%, meaning that the company is able to pay out its dividend with a bit of room to spare.
The next year is set to see EPS grow by 8.1%. If the dividend continues on this path, the future payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from $0.48 total annually to $0.92. This means that it has been growing its distributions at 6.7% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
First Financial Bancorp Could Grow Its Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that First Financial Bancorp has grown earnings per share at 6.7% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
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 2 warning signs for First Financial Bancorp that investors should know about before committing capital to this stock. Is First Financial Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.
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