First Savings Financial (FSFG) as a Top Dividend Stock: A Closer Look

Investors are always on the lookout for opportunities to grow their portfolios, especially when it comes to generating a reliable income. For income investors, dividends offer a steady cash flow and can be one of the most attractive benefits of owning shares in a company. However, not all companies distribute dividends, and identifying a great dividend stock can be quite challenging.

Dividends represent a portion of a company's earnings that are paid out to shareholders. This payment is commonly assessed by the dividend yield, which is calculated by dividing the annual dividend payment by the current stock price. Many financial studies have shown that dividends significantly contribute to long-term returns, with some estimates suggesting they can account for over one-third of total returns.

Examining First Savings Financial

First Savings Financial (FSFG), based in Jeffersonville, operates within the finance sector. The stock has demonstrated remarkable performance, recording a price increase of 51.13% since the beginning of the year. Currently, FSFG pays a dividend of $0.15 per share, which translates into a dividend yield of 2.36%. This yield, while attractive, is below the Financial - Savings and Loan industry average of 3.06%, but higher than the S&P 500's average yield of 1.53%.

In recent years, First Savings Financial has shown commendable dividend growth. The annualized dividend of $0.60 currently represents a 1.7% increase compared to the previous year. Over the past five years, the company has raised its dividend five times, achieving an average annual growth rate of 27.91%. Future growth in dividends will hinge on the company's earnings growth and its payout ratio, which indicates what part of its earnings it distributes as dividends. Presently, FSFG's payout ratio is at 28%, meaning it returns this fraction of its last twelve months' earnings back to shareholders.

Looking ahead to the current fiscal year, FSFG forecasts solid earnings growth, with the Zacks Consensus Estimate for 2024 predicting earnings of $2.65 per share—implying an impressive year-over-year growth rate of 55.88%.

Conclusion: Is FSFG a Wise Investment?

For those investing in dividend stocks, the appeal lies in various factors such as tax benefits, reduced overall portfolio risk, and enhanced profitability from investments. However, dividends are not universally offered by all companies. Typically, well-established companies with stable profits are more likely to distribute dividends than newer, high-growth businesses.

Furthermore, investors should be mindful that stocks with high dividend yields may face challenges during periods of rising interest rates. Nevertheless, First Savings Financial stands out not only as a promising dividend option but also as a compelling investment opportunity overall, holding a Zacks Rank of #1 (Strong Buy).

dividends, investing, growth