First Horizon's Dividend Offer: Stability in a Volatile Market?

First Horizon Corporation (NYSE:FHN) has announced its quarterly dividend of $0.15 per share, payable on July 1, 2025, to shareholders of record as of June 13, 2025. This dividend, consistent with the company’s history of steady payouts, offers investors a yield of 3.2% based on its recent closing price of $18.89 (May 2, 2025). Amid market volatility and mixed analyst forecasts, the question arises: Is FHN’s dividend a reliable source of income, or a red flag in an uncertain environment?

Dividend Details and Yield Analysis

The $0.15 quarterly dividend translates to an annualized payout of $0.60 per share, yielding 3.2% at the current stock price. This yield is competitive within the regional banking sector, particularly as interest rates remain elevated. FHN has maintained this quarterly dividend since 2023, following a 12% compound annual growth rate (CAGR) in dividends over the past decade. For instance, the annual dividend grew from $0.20 in 2015 to $0.60 today, reflecting long-term financial discipline.

Investors should note that FHN also offers dividends on its preferred shares, including Series B and C stocks, with payouts ranging from $0.41 to $0.83 per share. While these are less liquid than common stock, they provide higher yields for risk-tolerant investors.

Dividend Sustainability: A Closer Look

The dividend’s sustainability hinges on FHN’s financial health. Key metrics include:
- Payout Ratio: At 42% of earnings, FHN’s dividend is comfortably covered by profits. Analysts project this ratio to decline to 33% by 2028, as earnings per share (EPS) are expected to grow by 38.1% over the next three years.
- Dividend Cover Ratio: At 2.0, earnings are twice the dividend obligation, a strong indicator of resilience.
- Balance Sheet Strength: With $81.5 billion in assets and a conservative debt-to-equity ratio, FHN maintains a robust capital base to weather economic downturns.

Market Performance and Analyst Sentiment

FHN’s stock has exhibited volatility in 2025, trading between $15.03 (Jan 2024) and a recent high of $19.66 (May 2, 2025). However, it closed at $18.89 on May 2, slightly above the analyst consensus price target of $18.80.

Analysts remain cautiously optimistic, with a consensus "Buy" rating (31% "Strong Buy," 31% "Buy," and 38% "Hold"). While short-term forecasts are muted, FHN’s mortgage warehouse lending growth (up 28% year-over-year) and improving net interest margins provide tailwinds.

Longer-term, however, a deep learning model predicts a potential $14.58 price by late 2025 (-27.49% from November 2024 levels), citing risks like credit deterioration and rising defaults. This underscores the need for investors to weigh dividend yield against capital appreciation risks.

Risks and Considerations

• Economic Deterioration: A recession could pressure FHN’s loan portfolio, impacting earnings and dividends.
• Interest Rate Cycles: While high rates benefit net interest income, prolonged uncertainty may suppress stock valuations.
• Preferred Dividend Constraints: Preferred shareholders receive payouts before common shareholders, though FHN’s track record suggests it prioritizes both.

Conclusion: A Dividend Worth Considering?

First Horizon’s 3.2% dividend yield, paired with a 12% CAGR in payouts over a decade, positions it as a reliable income play for conservative investors. Its strong dividend cover ratio (2.0), manageable payout ratio, and fortress-like balance sheet further bolster its credibility.

However, the long-term price forecast of $14.58 (a -27% drop from current levels) introduces caution. Investors should consider their risk tolerance and time horizon:

• Income Seekers: The dividend provides a steady 3.2% yield with minimal payout risk, especially for those holding through dividend seasons.
• Growth Investors: FHN’s stock may underperform in a bear market, making it less appealing for capital growth.

In summary, FHN’s dividend is a solid bet for income-focused portfolios, but its stock’s valuation sensitivity to macroeconomic factors demands vigilance. As always, diversification and risk management remain critical in any investment strategy.

Final Note: Always consult updated price data and analyst reports before making investment decisions.