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Here's What We Like About First Financial Bankshares, Inc.'s (NASDAQ:FFIN) Upcoming Dividend

Readers hoping to buy First Financial Bankshares, Inc. (NASDAQ:FFIN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 13th of March, you won't be eligible to receive this dividend, when it is paid on the 1st of April.

First Financial Bankshares's next dividend payment will be US$0.12 per share, and in the last 12 months, the company paid a total of US$0.48 per share. Based on the last year's worth of payments, First Financial Bankshares stock has a trailing yield of around 1.7% on the current share price of $27.91. If you buy this business for its dividend, you should have an idea of whether First Financial Bankshares's dividend is reliable and sustainable. As a result, readers should always check whether First Financial Bankshares has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for First Financial Bankshares

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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. That's why it's good to see First Financial Bankshares paying out a modest 39% of its earnings.

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.

NasdaqGS:FFIN Historical Dividend Yield, March 8th 2020
NasdaqGS:FFIN Historical Dividend Yield, March 8th 2020

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see First Financial Bankshares's earnings per share have risen 12% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, ten years ago, First Financial Bankshares has lifted its dividend by approximately 7.8% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is First Financial Bankshares an attractive dividend stock, or better left on the shelf? Companies like First Financial Bankshares that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating First Financial Bankshares more closely.

So while First Financial Bankshares looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for First Financial Bankshares that you should be aware of before investing in their shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.