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First Financial (THFF) Hikes Dividend: Is It Worth a Look?

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First Financial Corporation (THFF - Free Report) has been increasing semi-annual dividend since 2011 and this time it’s no different. Last week, the company announced a 1.9% hike in dividend to 53 cents per share. The dividend will be paid out on Jan 15, 2021 to shareholders of record as of Jan 8, 2021.

Considering last day’s closing price of $37.58, First Financial’s dividend yield currently stands at 2.82%. This yield is not only attractive for income investors but also represents a steady income stream.

First Financial’s solid business model highlights its commitment toward enhancing shareholders’ value with strong cash generation capabilities despite economic slowdown. Prior to the latest revision, the company raised dividend to 52 cents per share in May 2019, marking nearly 2% hike.

Additionally, First Financial has a share repurchase plan in place. In October, the bank announced authorization to buy back up to 5% of its outstanding common stock. Earlier in February 2016, the company authorized a buyback of up to 5% of outstanding shares or nearly 637,500 shares. As of Sep 30, 2020, 32,616 shares remained available to be repurchased in the old authorization.

While First Financial stock looks promising based on a rise in dividend on a regular basis and share buybacks, one must take a look at a few other factors before taking any investment decision.

First Financial has a robust liquidity position. As of Sep 30, 2020, it had total debt of $106.1 million, while its cash and cash equivalents were $388.4 million. Thus, robust liquidity position and decent earnings strength are likely to help company sustain capital deployment activities.

Moreover, First Financial has solid prospects. The company has been growing organically and through acquisitions. Last July, it acquired Hopkinsville, KY-based HopFed Bancorp, Inc. in a cash-cum-stock deal worth $133.9 million. The deal substantially expanded the company’s footprint. First Financial now has more than 80 banking centers and five loan production offices located in Indiana, Illinois, Kentucky and Tennessee.

The Zacks Consensus Estimate for earnings has been revised 11.7% and 9.6% upward for 2020 and 2021, respectively, over the past 30 days. At present, First Financial sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Its shares have rallied 12.6% over the past six months, underperforming the industry’s 30.1% gain.

Other Banks Taking Similar Actions

Over the past few months, several other banks have raised their dividends to enhance shareholder value. Some of these are Bank OZK (OZK - Free Report) , Glacier Bancorp, Inc. (GBCI - Free Report) and Capital City Bank Group, Inc. (CCBG - Free Report) . Bank OZK raised quarterly dividend by nearly 1%, while Glacier Bancorp increased the same by 3.4%. Further, Capital City Bank announced a 7.1% dividend hike.

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