Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
First Community in Focus
Headquartered in Lexington, First Community (FCCO) is a Finance stock that has seen a price change of -6.83% so far this year. The holding company for First Community Bank is currently shelling out a dividend of $0.15 per share, with a dividend yield of 2.68%. This compares to the Banks - Southeast industry's yield of 2.4% and the S&P 500's yield of 1.59%.
Looking at dividend growth, the company's current annualized dividend of $0.60 is up 3.4% from last year. Over the last 5 years, First Community has increased its dividend 4 times on a year-over-year basis for an average annual increase of 5.34%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. First Community's current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FCCO expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $2.28 per share, with earnings expected to increase 25.97% from the year ago period.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, FCCO presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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First Community Corporation (FCCO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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