All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Headquartered in Abilene, First Financial Bankshares (FFIN) is a Finance stock that has seen a price change of -5.58% so far this year. The commercial banker operating mostly in Texas is paying out a dividend of $0.19 per share at the moment, with a dividend yield of 2.23% compared to the Banks - Southwest industry's yield of 1.33% and the S&P 500's yield of 1.53%.
Looking at dividend growth, the company's current annualized dividend of $0.76 is up 5.6% from last year. Over the last 5 years, First Financial Bankshares has increased its dividend 4 times on a year-over-year basis for an average annual increase of 7.93%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. First Financial's current payout ratio is 44%, meaning it paid out 44% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FFIN expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $1.81 per share, which represents a year-over-year growth rate of 16.03%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that FFIN is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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First Financial Bankshares, Inc. (FFIN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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