Investors who want to cash in on First Capital Inc’s (NASDAQ:FCAP) upcoming dividend of US$0.23 per share have only 4 days left to buy the shares before its ex-dividend date, 13 September 2018, in time for dividends payable on the 28 September 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding First Capital can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does First Capital fare?
The current trailing twelve-month payout ratio for the stock is 37.8%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. FCAP has increased its DPS from $0.72 to $0.92 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes FCAP a true dividend rockstar.
In terms of its peers, First Capital produces a yield of 2.4%, which is on the low-side for Mortgage stocks.
Considering the dividend attributes we analyzed above, First Capital is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for FCAP’s future growth? Take a look at our free research report of analyst consensus for FCAP’s outlook.
- Valuation: What is FCAP 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 FCAP 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 email@example.com.