Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see First Community Bankshares, Inc. (NASDAQ:FCBC) is about to trade ex-dividend in the next 2 days. You can purchase shares before the 1st of August in order to receive the dividend, which the company will pay on the 16th of August.
First Community Bankshares’s next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Based on the last year’s worth of payments, First Community Bankshares has a trailing yield of 3.0% on the current stock price of $33.36. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! As a result, readers should always check whether First Community Bankshares has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for First Community Bankshares
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately First Community Bankshares’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.
Click here to see how much of its profit First Community Bankshares paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, First Community Bankshares’s earnings per share have been growing at 16% a year for the past five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. First Community Bankshares’s dividend payments per share have declined at 1.1% per year on average over the past 10 years, which is uninspiring.
The Bottom Line
Is First Community Bankshares an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it’s usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term – as long as it’s done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating First Community Bankshares more closely.
Keen to explore more data on First Community Bankshares’s financial performance? Check out our visualisation of its historical revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.