Be Sure To Check Out 1st Constitution Bancorp (NASDAQ:FCCY) Before It Goes Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that 1st Constitution Bancorp (NASDAQ:FCCY) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 11th of February, you won't be eligible to receive this dividend, when it is paid on the 26th of February.
1st Constitution Bancorp's next dividend payment will be US$0.09 per share. Last year, in total, the company distributed US$0.36 to shareholders. Calculating the last year's worth of payments shows that 1st Constitution Bancorp has a trailing yield of 2.1% on the current share price of $17.31. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether 1st Constitution Bancorp can afford its dividend, and if the dividend could grow.
Check out our latest analysis for 1st Constitution Bancorp
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. 1st Constitution Bancorp paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 1st Constitution Bancorp paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, 1st Constitution Bancorp's earnings per share have been growing at 10% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. 1st Constitution Bancorp has delivered 16% dividend growth per year on average over the past four years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Should investors buy 1st Constitution Bancorp for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating 1st Constitution Bancorp more closely.
While it's tempting to invest in 1st Constitution Bancorp for the dividends alone, you should always be mindful of the risks involved. For example, 1st Constitution Bancorp has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.
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.
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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