The board of First Commonwealth Financial Corporation (NYSE:FCF) has announced that it will pay a dividend on the 20th of February, with investors receiving $0.135 per share. This means that the annual payment will be 3.0% of the current stock price, which is in line with the average for the industry.

First Commonwealth Financial's Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

First Commonwealth Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on First Commonwealth Financial's last earnings report, the payout ratio is at a decent 37%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 49.0%. Analysts forecast the future payout ratio could be 29% over the same time horizon, which is a number we think the company can maintain.

First Commonwealth Financial Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.28 in 2016, and the most recent fiscal year payment was $0.54. This works out to be a compound annual growth rate (CAGR) of approximately 6.8% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. First Commonwealth Financial has impressed us by growing EPS at 15% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like First Commonwealth Financial's Dividend

Overall, we like to see the dividend staying consistent, and we think First Commonwealth Financial might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.