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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Headquartered in Lexington, First Community (FCCO) is a Finance stock that has seen a price change of 2.54% so far this year. The holding company for First Community Bank is paying out a dividend of $0.15 per share at the moment, with a dividend yield of 2.6% compared to the Banks - Southeast industry's yield of 2.44% and the S&P 500's yield of 1.51%.

Looking at dividend growth, the company's current annualized dividend of $0.64 is up 10.3% 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 27%, meaning it paid out 27% of its trailing 12-month EPS as dividend.

FCCO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $2.56 per share, representing a year-over-year earnings growth rate of 41.44%.

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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 is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

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

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