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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see First Commonwealth Financial Corporation (NYSE:FCF) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 4th of February to receive the dividend, which will be paid on the 19th of February.
First Commonwealth Financial's upcoming dividend is US$0.11 a share, following on from the last 12 months, when the company distributed a total of US$0.44 per share to shareholders. Last year's total dividend payments show that First Commonwealth Financial has a trailing yield of 3.8% on the current share price of $11.73. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. First Commonwealth Financial paid out 59% of its earnings to investors last year, a normal payout level for most businesses.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at First Commonwealth Financial, with earnings per share up 6.0% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, First Commonwealth Financial has lifted its dividend by approximately 27% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Should investors buy First Commonwealth Financial for the upcoming dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. We're unconvinced on the company's merits, and think there might be better opportunities out there.
With that being said, if dividends aren't your biggest concern with First Commonwealth Financial, you should know about the other risks facing this business. Every company has risks, and we've spotted 1 warning sign for First Commonwealth Financial you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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.
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