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Are You Looking for a High-Growth Dividend Stock? Provident Financial (PFS) Could Be a Great Choice

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.

Provident Financial in Focus

Provident Financial (PFS - Free Report) is headquartered in Jersey City, and is in the Finance sector. The stock has seen a price change of 13.51% since the start of the year. The holding company for The Provident Bank is currently shelling out a dividend of $0.21 per share, with a dividend yield of 3.07%. This compares to the Financial - Savings and Loan industry's yield of 2.16% and the S&P 500's yield of 1.97%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.84 is up 2.4% from last year. Over the last 5 years, Provident Financial has increased its dividend 4 times on a year-over-year basis for an average annual increase of 8.32%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Provident Financial's current payout ratio is 46%, meaning it paid out 46% of its trailing 12-month EPS as dividend.

PFS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $1.85 per share, representing a year-over-year earnings growth rate of 1.65%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, PFS presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).


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