Why First Financial Bankshares (FFIN) is a Great Dividend Stock Right Now

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and, of course, 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 16.91% so far this year. The commercial banker operating mostly in Texas is currently shelling out a dividend of $0.22 per share, with a dividend yield of 2.52%. This compares to the Banks - Southwest industry's yield of 1.6% and the S&P 500's yield of 1.33%.

Looking at dividend growth, the company's current annualized dividend of $0.88 is up 17.3% 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 47%, meaning it paid out 47% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for FFIN for this fiscal year. The Zacks Consensus Estimate for 2026 is $2.04 per share, representing a year-over-year earnings growth rate of 15.25%.

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.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, FFIN presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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