Stock Analysis

First Community (NASDAQ:FCCO) Is Increasing Its Dividend To US$0.13

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NasdaqCM:FCCO
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First Community Corporation (NASDAQ:FCCO) will increase its dividend on the 15th of February to US$0.13. This takes the annual payment to 2.3% of the current stock price, which is about average for the industry.

View our latest analysis for First Community

First Community's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, First Community's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 7.2% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 28%, which is comfortable for the company to continue in the future.

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NasdaqCM:FCCO Historic Dividend January 22nd 2022

First Community 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. Since 2012, the dividend has gone from US$0.16 to US$0.52. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

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 has impressed us by growing EPS at 15% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like First Community's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for First Community that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

What are the risks and opportunities for First Community?

First Community Corporation operates as the bank holding company for First Community Bank which offers various commercial and retail banking products and services to small-to-medium sized businesses, professional concerns, and individuals.

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Rewards

  • Trading at 13.4% below our estimate of its fair value

  • Earnings are forecast to grow 4.09% per year

Risks

No risks detected for FCCO from our risks checks.

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