First Savings Financial Group, Inc. (NASDAQ:FSFG) has announced that it will pay a dividend of $0.15 per share on the 28th of June. This takes the annual payment to 3.6% of the current stock price, which is about average for the industry.

See our latest analysis for First Savings Financial Group

First Savings Financial Group's Payment Expected To Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

First Savings Financial Group has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Savings Financial Group's payout ratio of 52% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to rise by 49.4% over the next year. If the dividend continues on this path, the future payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

First Savings Financial Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.133 in 2014, and the most recent fiscal year payment was $0.60. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. First Savings Financial Group has seen earnings per share falling at 9.5% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in First Savings Financial Group stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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