On the 22 November 2018, 1st Constitution Bancorp (NASDAQ:FCCY) will be paying shareholders an upcoming dividend amount of US$0.075 per share. However, investors must have bought the company’s stock before 08 November 2018 in order to qualify for the payment. That means you have only 4 days left! Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into 1st Constitution Bancorp’s latest financial data to analyse its dividend attributes.
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does 1st Constitution Bancorp fare?
The current trailing twelve-month payout ratio for the stock is 23%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 17%, leading to a dividend yield of around 1.4%. However, EPS should increase to $1.59, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider 1st Constitution Bancorp as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, 1st Constitution Bancorp has a yield of 1.5%, which is on the low-side for Banks stocks.
If you are building an income portfolio, then 1st Constitution Bancorp is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three important factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for FCCY’s future growth? Take a look at our free research report of analyst consensus for FCCY’s outlook.
- Valuation: What is FCCY worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether FCCY is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.