Attention dividend hunters! First Community Corporation (NASDAQ:FCCO) will be distributing its dividend of US$0.11 per share on the 15 February 2019, and will start trading ex-dividend in 4 days time on the 30 January 2019. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at First Community’s most recent financial data to examine its dividend characteristics in more detail.
How I analyze 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 its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How does First Community fare?
First Community has a trailing twelve-month payout ratio of 28%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 31% which, assuming the share price stays the same, leads to a dividend yield of 2.3%. Furthermore, EPS should increase to $1.48. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, First Community has a yield of 2.1%, which is on the low-side for Banks stocks.
With these dividend metrics in mind, I definitely rank First Community 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. I’ve put together three fundamental factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for FCCO’s future growth? Take a look at our free research report of analyst consensus for FCCO’s outlook.
- Valuation: What is FCCO 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 FCCO 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.