First Community (FCCO) Could Be a Great Choice

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.

Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

First Community (FCCO) is headquartered in Lexington, and is in the Finance sector. The stock has seen a price change of -5.23% since the start of the year. 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 2.28% compared to the Banks - Southeast industry's yield of 2.19% 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.

FCCO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $2.99 per share, with earnings expected to increase 14.12% from the year ago period.

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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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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