Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.
Based in Lexington, First Community (FCCO) is in the Finance sector, and so far this year, shares have seen a price change of -2.7%. The holding company for First Community Bank is currently shelling out a dividend of $0.16 per share, with a dividend yield of 2.22%. This compares to the Banks - Southeast industry's yield of 2.07% and the S&P 500's yield of 1.36%.
Looking at dividend growth, the company's current annualized dividend of $0.64 is up 3.2% from last year. Over the last 5 years, First Community has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.74%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. First Community's current payout ratio is 26%, meaning it paid out 26% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FCCO for this fiscal year. The Zacks Consensus Estimate for 2026 is $2.98 per share, representing a year-over-year earnings growth rate of 13.74%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers its 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 is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
First Community Corporation (FCCO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
