First Commonwealth Financial Corporation (NYSE:FCF) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 6th of February, you won't be eligible to receive this dividend, when it is paid on the 21st of February.
First Commonwealth Financial's next dividend payment will be US$0.11 per share. Last year, in total, the company distributed US$0.44 to shareholders. Calculating the last year's worth of payments shows that First Commonwealth Financial has a trailing yield of 3.3% on the current share price of $13.52. 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 check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately First Commonwealth Financial's payout ratio is modest, at just 38% of profit.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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. For this reason, we're glad to see First Commonwealth Financial's earnings per share have risen 17% per annum 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. First Commonwealth Financial has seen its dividend decline 0.9% per annum on average over the past ten years, which is not great to see.
The Bottom Line
From a dividend perspective, should investors buy or avoid First Commonwealth Financial? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. First Commonwealth Financial ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Wondering what the future holds for First Commonwealth Financial? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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.
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