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 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

First Community (FCCO) is headquartered in Lexington, and is in the Finance sector. The stock has seen a price change of -0.79% since the start of the year. Currently paying a dividend of $0.15 per share, the company has a dividend yield of 2.52%. In comparison, the Banks - Southeast industry's yield is 2.35%, while the S&P 500's yield is 1.52%.

In terms of dividend growth, the company's current annualized dividend of $0.60 is up 3.4% from last year. In the past five-year period, First Community has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.61%. Future dividend growth will depend on earnings growth as well as 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 30%, meaning it paid out 30% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, FCCO expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $2.35 per share, which represents a year-over-year growth rate of 29.83%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that FCCO is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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

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