The board of First Community Corporation (NASDAQ:FCCO) has announced that it will pay a dividend of $0.15 per share on the 18th of February. This payment means the dividend yield will be 2.3%, which is below the average for the industry.
See our latest analysis for First Community
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.
Having distributed dividends for at least 10 years, First Community has a long history of paying out a part of its earnings to shareholders. Based on First Community’s last earnings report, the payout ratio is at a decent 32%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Over the next 3 years, EPS is forecast to expand by 60.2%. Analysts estimate the future payout ratio will be 25% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $0.24 total annually to $0.60. This means that it has been growing its distributions at 9.6% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The company’s investors will be pleased to have been receiving dividend income for some time. However, First Community has only grown its earnings per share at 4.6% per annum over the past five years. While EPS growth is quite low, First Community has the option to increase the payout ratio to return more cash to shareholders.
In summary, it is good to see that the dividend is staying consistent, and we don’t think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in First Community stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
