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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, First Community Bankshares, Inc. (NASDAQ:FCBC) has paid a dividend to shareholders. It currently yields 2.6%. Should it have a place in your portfolio? Let's take a look at First Community Bankshares in more detail.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How well does First Community Bankshares fit our criteria?
The company currently pays out 37% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 39% which, assuming the share price stays the same, leads to a dividend yield of around 2.7%. Moreover, EPS should increase to $2.25.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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 facing FCBC investors is that whilst it has continued to pay shareholders dividend, dividends are lower today, than they were a decade ago. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time.
Relative to peers, First Community Bankshares produces a yield of 2.6%, which is on the low-side for Banks stocks.
With these dividend metrics in mind, I definitely rank First Community Bankshares as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. Below, I've compiled three essential aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for FCBC’s future growth? Take a look at our free research report of analyst consensus for FCBC’s outlook.
- Valuation: What is FCBC 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 FCBC 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.