Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
Based in Terre Haute, First Financial Corp. (THFF) is in the Finance sector, and so far this year, shares have seen a price change of 27.47%. The holding company for First Financial Bank is paying out a dividend of $0.56 per share at the moment, with a dividend yield of 2.91% compared to the Banks - Midwest industry's yield of 2.47% and the S&P 500's yield of 1.39%.
Looking at dividend growth, the company's current annualized dividend of $2.24 is up 9.8% from last year. Over the last 5 years, First Financial Corp. has increased its dividend 4 times on a year-over-year basis for an average annual increase of 17.41%. 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 Corp.'s current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, THFF expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $7.32 per share, representing a year-over-year earnings growth rate of 9.58%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, THFF 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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First Financial Corporation Indiana (THFF): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).