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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Based in Strasburg, First National Corp. (FXNC) is in the Finance sector, and so far this year, shares have seen a price change of 19.02%. The company is currently shelling out a dividend of $0.17 per share, with a dividend yield of 2.26%. This compares to the Banks - Southeast industry's yield of 1.94% and the S&P 500's yield of 1.38%.
Looking at dividend growth, the company's current annualized dividend of $0.68 is up 7.1% from last year. Over the last 5 years, First National Corp. has increased its dividend 4 times on a year-over-year basis for an average annual increase of 7.70%. 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 National's current payout ratio is 29%, meaning it paid out 29% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FXNC expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $2.38 per share, with earnings expected to increase 12.26% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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. With that in mind, FXNC 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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First National Corp. (FXNC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).