First Community Bankshares (NASDAQ:FCBC) Has Announced A Dividend Of $0.29

First Community Bankshares, Inc. (NASDAQ:FCBC) has announced that it will pay a dividend of $0.29 per share on the 25th of August. This payment means that the dividend yield will be 3.4%, which is around the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that First Community Bankshares' stock price has increased by 44% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for First Community Bankshares

First Community Bankshares' Payment Expected To Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable.

First Community Bankshares has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Community Bankshares' payout ratio of 41% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 13.1% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 59%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

First Community Bankshares Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.44 in 2013 to the most recent total annual payment of $1.16. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

First Community Bankshares Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. First Community Bankshares has seen EPS rising for the last five years, at 9.6% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

An additional note is that the company has been raising capital by issuing stock equal to 15% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like First Community Bankshares' Dividend

Overall, we like to see the dividend staying consistent, and we think First Community Bankshares might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for First Community Bankshares you should be aware of, and 1 of them is a bit unpleasant. Is First Community Bankshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.