First Merchants Corporation: A Dividend Powerhouse for Income Investors?

For income-focused investors, dividend stability and growth are paramount. First Merchants Corporation (FRME) has long been a standout in the banking sector, boasting a decades-long streak of consistent dividend increases. But as of November 2025, with the company's latest quarterly payout of $0.36 per share according to the press release, the question remains: Can this regional bank sustain its dividend growth trajectory amid evolving economic conditions?

A Legacy of Dividend Growth

First Merchants' dividend history is nothing short of impressive. From a mere $0.00 in 2006, the company began a meaningful upward trajectory in 2012, with a 100% jump to $0.10 per share as reported by dividendmax. This momentum continued through the decade, with annual increases ranging from 41% to 80% as shown in dividend data. By 2019, the dividend had reached $1.00 per share, and even during the pandemic-driven economic slowdown in 2020, the company maintained a modest 4% increase according to dividend records.

What stands out is the consistency. Over the past five years alone, dividends have grown from $1.04 in 2020 to $1.39 in 2024 according to dividend data, reflecting an average annual growth rate of approximately 7.5%. This resilience underscores the company's commitment to rewarding shareholders, even in uncertain times.

Earnings and Payout Ratio: A Sustainable Model?

Dividend sustainability hinges on earnings growth and prudent payout ratios. First Merchants' third-quarter 2025 results as reported by the company reveal a net income of $56.3 million, or $0.98 per diluted share, a 15.3% increase compared to the same period in 2024 according to QuiverQuant. On an annualized basis, assuming similar quarterly performance, this suggests a full-year 2025 net income of roughly $225 million.

To estimate the 2025 dividend payout ratio, we consider the projected full-year dividend of $1.44 per share (four quarters of $0.36) as reported in the press release. Using the $0.98 quarterly EPS, the annualized EPS would be approximately $3.92. This yields a payout ratio of roughly 36.7% ($1.44 / $3.92), a healthy figure that leaves ample room for reinvestment and future growth according to financial analysis.

Historically, First Merchants has maintained a conservative payout ratio, even as dividends have surged. For instance, in 2024, with a dividend of $1.39 per share and an EPS of $3.42 according to Macrotrends, the payout ratio was approximately 40.6%, still well below the 50% threshold often seen as a warning sign for dividend sustainability.

Strategic Growth and Risk Mitigation

First Merchants' recent acquisition of First Savings Financial Group as reported in financial news adds $2.4 billion in assets, expanding its footprint in Southern Indiana and Louisville. While such deals can strain short-term earnings, the long-term benefits-such as increased loan growth and customer base diversification-position the company to sustain its earnings momentum. Third-quarter 2025 data already shows total loan growth of $288.8 million, or 8.7% annualized as reported in the earnings announcement, indicating strong operational health.

However, risks persist. Rising interest rates and credit risk in a post-pandemic economy could pressure net interest margins. Yet, First Merchants' diversified loan portfolio and robust capital reserves suggest it is well-equipped to navigate these challenges.

Conclusion: A Buy for Income Investors?

For income investors, First Merchants offers a compelling blend of consistent dividend growth, a sustainable payout ratio, and a strong earnings trajectory. While the full-year 2025 results remain pending, the third-quarter performance and strategic acquisitions reinforce confidence in the company's ability to maintain its dividend streak.

That said, investors should monitor the integration of First Savings and broader macroeconomic trends. For now, First Merchants remains a top-tier candidate for those seeking reliable, growing income streams in the banking sector.