First Commonwealth Financial's (NYSE:FCF) Upcoming Dividend Will Be Larger Than Last Year's

The board of First Commonwealth Financial Corporation (NYSE:FCF) has announced that it will be increasing its dividend on the 19th of November to US$0.12. This will take the annual payment to 3.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for First Commonwealth Financial

First Commonwealth Financial's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, First Commonwealth Financial's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 4.6%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 38%, which we are pretty comfortable with and we think is feasible on an earnings basis.

First Commonwealth Financial Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.12 in 2011, and the most recent fiscal year payment was US$0.46. This means that it has been growing its distributions at 14% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see First Commonwealth Financial has been growing its earnings per share at 18% a year over the past five years. First Commonwealth Financial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like First Commonwealth Financial's Dividend

Overall, a dividend increase is always good, and we think that First Commonwealth Financial is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for First Commonwealth Financial that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

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