All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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 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 Commonwealth Financial in Focus
Headquartered in Indiana, First Commonwealth Financial (FCF) is a Finance stock that has seen a price change of -6.09% so far this year. The financial holding company is paying out a dividend of $0.13 per share at the moment, with a dividend yield of 3.27% compared to the Banks - Northeast industry's yield of 2.87% and the S&P 500's yield of 1.6%.
Looking at dividend growth, the company's current annualized dividend of $0.52 is up 1% from last year. In the past five-year period, First Commonwealth Financial has increased its dividend 4 times on a year-over-year basis for an average annual increase of 4.10%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. First Commonwealth Financial's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FCF expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $1.41 per share, with earnings expected to increase 0.71% 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. But, not every company offers 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FCF 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 Commonwealth Financial Corporation (FCF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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