The board of First Horizon Corporation (NYSE:FHN) has announced that it will pay a dividend of $0.15 per share on the 1st of April. This means the dividend yield will be fairly typical at 2.7%.

Check out our latest analysis for First Horizon

First Horizon's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having distributed dividends for at least 10 years, First Horizon has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Horizon's payout ratio of 44% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 57.4%. The future payout ratio could be 30% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

First Horizon Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.20 in 2015 to the most recent total annual payment of $0.60. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

First Horizon May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that First Horizon's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. First Horizon is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

We Really Like First Horizon's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for First Horizon that investors need to be conscious of moving forward. Is First Horizon not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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