Summary
Generating consistent cash flow from investments is a top priority for income investors, and dividends are a key contributor to long-term returns. For those seeking dividend-paying stocks, First Community Corporation (FCCO) presents an attractive opportunity with its strong dividend yield and solid earnings growth prospects.
Dividends: A Key Driver of Long-Term Returns
Dividends have been shown to make up a significant portion of long-term returns in many academic studies. In fact, dividends often contribute more than one-third of total returns. This is because dividends are a direct distribution of a company’s earnings to shareholders, providing a regular income stream that can help mitigate the volatility of the stock market.
For income investors, dividends are particularly important as they offer a relatively stable source of cash flow. Unlike capital gains, which can be unpredictable and subject to fluctuations in the overall market, dividend payments provide a more consistent and predictable income stream. This is especially important for retirees or those living off their investments, who rely on regular income to meet their expenses.
First Community Corporation: A Dividend-Paying Stock with Strong Growth Prospects
Headquartered in Lexington, First Community (FCCO) is a Finance stock that has seen a price change of -2.42% so far this year. As a holding company for First Community Bank, FCCO pays out a dividend of $0.15 per share at the moment, with a dividend yield of 2.56%. This is higher than both the Banks – Southeast industry’s yield of 2.41% and the S&P 500’s yield of 1.54%.
In terms of dividend growth, FCCO has increased its annualized dividend by $0.60 over the last year, representing a 3.4% increase. Over the past five years, the company has raised its dividend three times on a year-over-year basis, resulting in an average annual increase of 5.61%. While future dividend growth will depend on both earnings growth and the company’s payout ratio, FCCO’s current payout ratio is 30%, indicating that it pays out 30% of its trailing 12-month EPS as dividend.
Earnings Growth: A Key Factor in Dividend Sustainability
FCCO’s earnings growth prospects are solid for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.35 per share, representing a year-over-year earnings growth rate of 29.83%. This strong earnings growth will help support dividend payments and ensure the company’s ability to continue paying dividends in the future.
Investing in Dividend-Paying Stocks: Key Considerations
When investing in dividend-paying stocks, it’s essential to consider several factors. First and foremost, investors must be aware that high-yielding stocks tend to struggle during periods of rising interest rates. This is because higher interest rates can make bond yields more attractive, leading investors to shift their focus from equities to fixed-income securities.
As a result, income investors must carefully evaluate the dividend yield and payout ratio of potential investments. A high dividend yield may not always be an indication of a strong investment opportunity. Instead, it’s essential to consider the company’s earnings growth prospects, debt levels, and overall financial health.
Conclusion
In conclusion, First Community Corporation (FCCO) presents a compelling investment opportunity for income investors seeking dividend-paying stocks with solid growth prospects. With its attractive dividend yield, strong earnings growth, and relatively low payout ratio, FCCO is an excellent choice for those looking to generate consistent cash flow from their investments. While there are no guarantees of future dividend payments or stock performance, FCCO’s track record of dividend growth and strong financials make it an attractive option for income investors.