Last update on 2024-06-27

First Community Bankshares (FCBC) - Dividend Analysis (Final Score: 7/8)

Dive into First Community Bankshares (FCBC) dividend analysis, examining performance, stability, and sustainability using 8 key criteria.

Short Analysis - Dividend Score: 7

We're running First Community Bankshares (FCBC) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

The dividend yield represents the ratio of a company's annual dividend compared to its stock price. It's an important metric for income-focused investors as it indicates how much return they can expect in the form of dividends. A higher yield might suggest a good income source, but investors should also examine the sustainability of high yields.

First Community Bankshares (FCBC) boasts a current dividend yield of 3.1267%, notably higher than the industry average of 2.76%, suggesting it's a potentially attractive choice for dividend-focused investors. Over the past 20 years, FCBC's dividend yield has generally stayed above 2%, sporadically surpassing 3% and even reaching highs above 4% during specific years (2018, 2020). Comparatively, the industry average dividend yield has remained mostly below 2.76%, dipping significantly during economic downturns (e.g., 1.67% in 2013, 1.57% in 2016). The consistently higher yield suggests FCBC has been a reliable dividend payer compared to its peers. However, this higher yield tendency requires scrutiny. Factors like a notable dip in stock prices (e.g., 2008-2009 financial crisis) and stable or progressively increasing dividends per share indicate a careful balance; the company maintained payouts even during challenging years. Consistent raises in dividends per share, especially from 2016 onwards, could hint at FCBC's growing financial stability and profitability. Ultimately, while a high dividend yield is appealing, investors should also consider other indicators of company health to gauge sustainable returns.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend payouts over a specified period. A rate higher than 5% indicates strong financial health and a shareholder-friendly policy.

Analyzing the Dividend Ratio data for the past 20 years, the First Community Bankshares (FCBC) has an average dividend growth rate of 5.62%. While this average nominally exceeds the 5% threshold, it should be noted that there are significant fluctuations from year to year. For instance, dramatic decreases in 2009 (-73.2143%) counterbalance substantial increases such as in 2018 (85.2941%). These volatile shifts suggest that while FCBC meets the criterion on average, the consistency and reliability of these dividend payments vary significantly over the years. This level of volatility could pose a risk to investors seeking stable and predictable dividend income. However, the upward trend in recent years is promising, indicating a potential stabilization of their payout strategy.

Average annual Payout Ratio lower than 65% in the last 20 years?

This criterion focuses on whether the company's average payout ratio has remained below 65% over the last 20 years.

The historical payout ratio from 2003 to 2023 shows an average of approximately 54.88%, which is comfortably below the 65% threshold. This is a positive trend for First Community Bankshares (FCBC) as it indicates a conservative approach to payouts, ensuring that a significant portion of earnings is retained for growth or other commitments. However, it is worth noting a few anomalies: the exceptionally high payout ratio in 2008 (404.7705) and the negative payout in 2009 (-11.6682). Despite these irregularities, FCBC has generally maintained prudent payout policies, excluding such outliers, further strengthening its financial stability.

Dividends Well Covered by Earnings?

Ensuring that dividends are well covered by earnings is crucial because it indicates a company's ability to sustain its dividend payouts without depleting its cash reserves or taking on more debt.

Analyzing the Dividend Coverage Ratio—which is the ratio of Earnings per Share (EPS) to Dividends per Share (DPS)—gives us a good idea of the financial health and prudence of First Community Bankshares (FCBC). Over the years, FCBC has witnessed significant fluctuations in its EPS. Particularly, the years 2009 and 2010 saw drastic declines in earnings (-$2.5711 and $1.2258 respectively), which substantially impacted the dividend coverage ratio, with values at -0.1167 in 2009 and 0.3263 in 2010. Despite this, the company continued to pay dividends. It's worth noting that the ratio improved to strong levels later, hovering generally between 0.3 and 0.577. A healthy coverage ratio is ideally above 2, which signifies that although FCBC's dividends are mostly covered by earnings, there is room for improvement. This could potentially raise red flags for more risk-averse investors. From 2011 onwards, the ratio has consistently stayed below 1, suggesting dividends are covered but not with a significant margin. Such low ratios indicate a higher risk in the company's ability to maintain these payouts in challenging economic conditions.

Dividends Well Covered by Cash Flow?

Evaluating how well dividends are covered by a company’s free cash flow.

First Community Bankshares' (FCBC) coverage of dividends by free cash flow fluctuated significantly over the period from 2003 to 2023, indicating varying degrees of dividend sustainability. In the early years, from 2003 to 2008, the dividend coverage ratio was volatile, with lows like 0.1375 in 2010 indicating potential strain. However, the coverage improved considerably post-2010, maintaining relatively healthier ratios above 0.3 in several years. Despite some fluctuations, the general trend suggests FCBC has been improving cash flow management to support dividend payouts. This improving trend is a positive indicator for existing and potential investors, signalling a relatively stable dividend policy in recent years, though still highlighting potential areas of risk when coverage dips, even momentarily.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments is crucial for income-seeking investors as it provides a reliable income stream. Fluctuating dividends can undermine investor confidence and financial planning.

Upon analyzing First Community Bankshares' dividend payments over the past two decades, it is evident that there was a significant drop in 2009, when the dividend per share fell from $1.12 in 2008 to $0.3, indicating a more than 20% decrease. However, this seems to be a one-time issue likely due to the financial crisis. Post-2009, the dividends have regained stability. This singular dip may concern long-term investors, but the overall trend of recovery and growth post-crisis portrays resilience.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years highlights a company's commitment to returning value to shareholders consistently.

First Community Bankshares (FCBC) has a documented history of paying dividends every year from 1998 to 2023. Despite some fluctuations, particularly a significant drop in 2009, the general trend showcases stability and resilience. Paying dividends for 25 years is a testament to FCBC's ability to generate free cash flow consistently, implying financial robustness. This trend is favorable as it enhances investor confidence and indicates a shareholder-friendly management.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for First Community Bankshares (FCBC) and why it is important to consider

The share repurchase program from FCBC was not entirely reliable in the last 20 years given the fluctuating pattern. Although the bank did buy back shares in years like 2006, 2008, 2014, and others as listed, there were significant periods when shares increased, particularly in the years from 2008 to 2012. The thematic buying back of shares reduces the total share count, which should ideally enhance the value for existing shareholders if executed consistently. However, FCBC's average repurchase rate over the last 20 years is -2.6182%, indicating an overall increase in share count. This lack of sustained buybacks could reflect a period of dilution rather than consolidation, arguably positioning it negatively compared to entities with more consistent buyback schemes.