First Savings Financial Group, Inc. (NASDAQ:FSFG) will pay a dividend of $0.15 on the 31st of December. The dividend yield is 2.0% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for First Savings Financial Group

First Savings Financial Group's Earnings Will Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having distributed dividends for at least 10 years, First Savings Financial Group has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Savings Financial Group's payout ratio of 30% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 78.4% over the next 3 years. Analysts forecast the future payout ratio could be 22% over the same time horizon, which is a number we think the company can maintain.

First Savings Financial Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.147 in 2014 to the most recent total annual payment of $0.60. This means that it has been growing its distributions at 15% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. First Savings Financial Group has seen earnings per share falling at 3.1% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

Overall, we think First Savings Financial Group is a solid choice as a dividend stock, even though the dividend wasn't raised this year. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on First Savings Financial Group management tenure, salary, and performance. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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