First Commonwealth Financial Corporation (NYSE:FCF) stock is about to trade ex-dividend in four days. You can purchase shares before the 6th of May in order to receive the dividend, which the company will pay on the 21st of May.
First Commonwealth Financial's next dividend payment will be US$0.12 per share, and in the last 12 months, the company paid a total of US$0.46 per share. Last year's total dividend payments show that First Commonwealth Financial has a trailing yield of 3.2% on the current share price of $14.49. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately First Commonwealth Financial's payout ratio is modest, at just 40% 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.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see First Commonwealth Financial's earnings per share have risen 15% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, First Commonwealth Financial has lifted its dividend by approximately 28% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Has First Commonwealth Financial got what it takes to maintain its dividend payments? Companies like First Commonwealth Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, First Commonwealth Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while First Commonwealth Financial has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 2 warning signs with First Commonwealth Financial (at least 1 which is significant), and understanding them should be part of your investment process.
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.
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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. 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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