Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see First Community Corporation (NASDAQ:FCCO) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 26th of July will not receive the dividend, which will be paid on the 12th of August.
First Community's next dividend payment will be US$0.11 per share, on the back of last year when the company paid a total of US$0.44 to shareholders. Calculating the last year's worth of payments shows that First Community has a trailing yield of 2.2% on the current share price of $19.66. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether First Community has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately First Community's payout ratio is modest, at just 30% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see First Community's earnings per share have risen 13% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. First Community has delivered an average of 3.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because First Community is keeping back more of its profits to grow the business.
To Sum It Up
Has First Community got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, First Community looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Ever wonder what the future holds for First Community? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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.