Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, First Community Corporation (NASDAQ:FCCO) has paid dividends to shareholders, and these days it yields 1.7%. Let’s dig deeper into whether First Community should have a place in your portfolio.
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share risen in the past couple of years?
- Is is able to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How does First Community fare?
The current trailing twelve-month payout ratio for the stock is 35%, which means that the dividend is covered by earnings. However, going forward, analysts expect FCCO’s payout to fall to 28% of its earnings, which leads to a dividend yield of 1.9%. However, EPS should increase to $1.58, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although FCCO’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Compared to its peers, First Community has a yield of 1.7%, which is on the low-side for Banks stocks.
Considering the dividend attributes we analyzed above, First Community is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three pertinent factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for FCCO’s future growth? Take a look at our free research report of analyst consensus for FCCO’s outlook.
- Valuation: What is FCCO 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 FCCO is currently mispriced by the market.
- Other 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 firstname.lastname@example.org.