Are You Looking for a High-Growth Dividend Stock?
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
First Community in Focus
Headquartered in Lexington, First Community (FCCO) is a Finance stock that has seen a price change of 1.25% so far this year. The holding company for First Community Bank is currently shelling out a dividend of $0.15 per share, with a dividend yield of 2.75%. This compares to the Banks - Southeast industry's yield of 2.47% and the S&P 500's yield of 1.54%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.60 is up 7.1% from last year. First Community has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 5.36%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. First Community's current payout ratio is 39%. This means it paid out 39% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FCCO for this fiscal year. The Zacks Consensus Estimate for 2024 is $1.67 per share, representing a year-over-year earnings growth rate of 7.74%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that FCCO is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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