First Community Bankshares (NASDAQ:FCBC) Is Due To Pay A Dividend Of $0.29

Simply Wall St

Sat, Jul 29, 2023, 6:04 AM 3 min read

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that First Community Bankshares' stock price has increased by 44% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for First Community Bankshares

First Community Bankshares' Dividend Forecasted To Be Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time.

Having distributed dividends for at least 10 years, First Community Bankshares has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Community Bankshares' payout ratio of 41% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 13.1% over the next year. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 59%, which would be comfortable for the company to continue in the future.

historic-dividend — NasdaqGS:FCBC Historic Dividend July 29th 2023

First Community Bankshares Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.44 in 2013 to the most recent total annual payment of $1.16. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

First Community Bankshares Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that First Community Bankshares has grown earnings per share at 9.6% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We should note that First Community Bankshares has issued stock equal to 15% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

First Community Bankshares Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think First Community Bankshares might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for First Community Bankshares you should be aware of, and 1 of them is potentially serious. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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