First Community Bankshares (NASDAQ:FCBC) Is Due To Pay A Dividend Of $0.29
The board of First Community Bankshares, Inc. (NASDAQ:FCBC) has announced that it will pay a dividend of $0.29 per share on the 23rd of February. This payment means that the dividend yield will be 3.2%, which is around the industry average.
Check out our latest analysis for First Community Bankshares
First Community Bankshares' Earnings Will Easily Cover The Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much.
First Community Bankshares has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Community Bankshares' payout ratio of 43% is a good sign as this means that earnings decently cover dividends.
EPS is set to fall by 20.4% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 50% over the same time period, which we think the company can easily maintain.
First Community Bankshares Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.48 in 2014, and the most recent fiscal year payment was $1.16. This works out to be a compound annual growth rate (CAGR) of approximately 9.2% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 3.4% per annum over the last five years, which admittedly is a bit slow. Growth of 3.4% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
We should note that First Community Bankshares has issued stock equal to 14% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
First Community Bankshares Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think First Community Bankshares might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for First Community Bankshares you should be aware of, and 1 of them is a bit unpleasant. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
