First Community (FCCO) Could Be a Great Choice

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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.

Based in Lexington, First Community (FCCO) is in the Finance sector, and so far this year, shares have seen a price change of -0.47%. The holding company for First Community Bank is paying out a dividend of $0.16 per share at the moment, with a dividend yield of 2.17% compared to the Banks - Southeast industry's yield of 2.15% and the S&P 500's yield of 1.47%.

Looking at dividend growth, the company's current annualized dividend of $0.64 is up 3.2% from last year. Over the last 5 years, First Community has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.74%. 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 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, FCCO expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $2.99 per share, representing a year-over-year earnings growth rate of 14.12%.

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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. With that in mind, FCCO is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of #3 (Hold).

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This article originally published on Zacks Investment Research (zacks.com).

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