Last update on 2024-06-27

First Financial Bancorp (FFBC) - Dividend Analysis (Final Score: 6/8)

Evaluate First Financial Bancorp's (FFBC) dividend performance with our comprehensive analysis scoring 6/8, highlighting yield stability and growth potential.

Short Analysis - Dividend Score: 6

We're running First Financial Bancorp (FFBC) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

First Financial Bancorp (FFBC) was evaluated based on 8 criteria related to dividend performance and stability, achieving a score of 6. The main takeaways are as follows: FFBC has a higher-than-average dividend yield of 3.8737%, showing resilience through historical events like the 2008 financial crisis. The dividend growth rate averaged 5.76% but was inconsistent with notable fluctuations. The payout ratio averaged 62.80% while remaining below the threshold of 65%, indicating sustainability. However, the dividend coverage ratio has been below 1 in recent years, casting doubt on dividend sustainability. Similarly, cash flow coverage for dividends has also shown instability over the years. While the company has a long history of over 25 years of paying dividends, significant fluctuations were observed around 2009. Stock repurchase activities have been inconsistent. Overall, FFBC displays a mixed but somewhat positive trend favoring income-focused investors.

Insights for Value Investors Seeking Stable Income

Investors should take a cautious approach when considering FFBC. While the high and resilient dividend yield is attractive, the inconsistent dividend growth and coverage ratios, along with fluctuating cash flow coverage, suggest potential risks. Long-term dividend payment history is a positive aspect, but recent payout trends demand attention. Interested investors should consider this mixed outlook before making any investment decisions.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It's an important metric for income-focused investors.

First Financial Bancorp's (FFBC) current dividend yield is 3.8737%, which is significantly higher than the industry average of 2.76%. This high yield suggests that the company is returning a substantial portion of its earnings to shareholders, making it attractive for income-focused investors. Looking at the historical data, FFBC's dividend yield has generally been above the industry average for most of the last 20 years. Notably, despite fluctuations, it remained well above the industry average during the 2008 financial crisis, peaking at 8.0711% in 2011, compared to the industry’s 2.07% in 2012. This demonstrates the firm's resilience and commitment to returning capital to shareholders even during challenging times. However, its dividend consistency seems to stabilize around a yield of approximately 3.5% to 4.5% in more recent years, aligning with stronger stock price performance. Overall, FFBC's higher-than-average dividend yield is a positive indicator for potential investors looking for steady income.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures the percentage increase in a company's dividend payments over time. A higher rate indicates a company’s capacity to sustainably increase payouts, reflecting strong financial health.

The Dividend Per Share Growth Rate of First Financial Bancorp (FFBC) displays an average of 5.76% over the last 20 years. However, this figure masks significant variability with certain years showing negative growth rates (e.g., 2009: -41.18%, 2010: 0%) and abnormally high spikes (e.g., 2011: 95%). This inconsistency is concerning as it indicates the absence of steady and reliable growth, which may imply underlying financial volatility. Despite averaging above 5%, investors should be wary of the fluctuating yearly figures, suggesting that FFBC does not consistently demonstrate a stable upward trend in dividend growth.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio is a critical financial metric that shows the proportion of earnings a company pays to shareholders in the form of dividends. It is vital to ensure long-term sustainability.

First Financial Bancorp (FFBC) has maintained an average payout ratio of 62.80% over the last 20 years. The most recent three-year payout ratios were 42.62%, 39.54%, and 33.78%. While FFBC's average payout ratio is slightly below our target threshold of 65%, it demonstrates the company's ability to pay dividends without compromising future growth and stability. Notably, occasional high payout spikes, such as in 2013 and 2010, seem anomalous and have been offset by considerably lower ratios in recent years, hinting at improved financial discipline. Thus, the trend in FFBC's payout ratio is largely positive for dividend sustainability.

Dividends Well Covered by Earnings?

Dividends Coverage Ratio measures the proportion of a company's earnings it pays to shareholders in the form of dividends. It ensures that a company generates enough profit to cover dividend payments.

First Financial Bancorp's dividend coverage ratio shows significant variation over the years. Ratios below 1, particularly in recent years (0.395 in 2022 and 0.338 in 2023), indicate that the company isn't earning enough to cover its declared dividends. This trend is concerning, suggesting that the dividends might not be sustainable without improvement in earnings.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow are a sign of financial health as they show the company's ability to pay dividends from its core operations, rather than using debt or other sources.

First Financial Bancorp (FFBC) has shown fluctuating numbers in terms of covering dividends through free cash flow over the years. A coverage ratio above 1 indicates that a company has more than enough free cash flow to cover its dividends. In the data provided, many years, such as 2003 (0.50), 2004 (0.67), and 2005 (0.57), show ratios below 1, indicating that their cash flows were insufficient to cover dividends entirely. The year 2006 stands out with an extraordinarily high coverage of 23.59, suggesting an unusual cash flow surge or lower dividend payout. On the whole, FFBC's ability to cover its dividends from cash flow appears unstable, with multiple years showing insufficient coverage (ratios below 1), which might not be a good sign for dividend sustainability. Consistency in covering dividends by free cash flow is crucial for investors seeking reliable dividends.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

The dividend per share for First Financial Bancorp (FFBC) over the past 20 years varied, with significant fluctuations observed. The dividend per share fluctuated most notably in 2009, dropping to $0.40 from $0.68 in the previous year. However, subsequent years saw a recovery such as in 2011 with $0.78 and 2012 with $1.18 per share. Although there were ups and downs, the dividends stabilized towards the later years, with the last several years showing dividends at around $0.92. Nonetheless, a significant drop more than 20% did occur in 2009, indicating a period of instability. For income-seeking investors, this volatility could be concerning, though the recent stability could be seen as a positive trend.

Dividends Paid for Over 25 Years?

Examining whether a company has paid dividends for over 25 years helps to assess the company’s consistency, stability, and shareholder value.

First Financial Bancorp has indeed demonstrated an ability to pay dividends consistently for over 25 years, as evidenced by the dividend per share records from 1998 to 2023. Despite some fluctuations, such as the notable increase to ₹1.18 in 2012 and a dip to ₹0.4 in 2009 during the financial crisis, the overall trend shows relative stability. Thus, this trend is a positive indicator of the company’s commitment to returning value to its shareholders consistently over a long period of time.

Reliable Stock Repurchases Over the Past 20 Years?

Reliability of stock repurchases examines whether a company consistently buys back its own shares over a long period, such as 20 years, which can stabilize share prices, improve financial ratios, and signal management's confidence in the company.

Over the past 20 years, First Financial Bancorp (FFBC) shows a mixed trend in stock repurchases. The number of shares outstanding has steadily decreased from 44.4 million in 2003 to around 39.8 million in 2008, indicating repurchase activity. However, from 2008 onward, shares issued climbed to over 90 million by 2018 and remained around that level. With only 4.44 years showing reliable repurchases out of 20, the trend signifies inconsistent efforts in stock buybacks, suggesting FFBC may repurchase stocks strategically rather than systematically. This inconsistency can be viewed negatively for investors seeking predictable buyback policies but may reflect strategic capital allocation under varying market conditions.