Why Bank OZK (OZK) is a Great Dividend Stock Right Now

OZK

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.

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

Bank OZK in Focus

Bank OZK (OZK - Free Report) is headquartered in Little Rock, and is in the Finance sector. The stock has seen a price change of -8.3% since the start of the year. Currently paying a dividend of $0.32 per share, the company has a dividend yield of 3%. In comparison, the Banks - Northeast industry's yield is 2.67%, while the S&P 500's yield is 1.73%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.28 is up 13% from last year. Over the last 5 years, Bank OZK has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.06%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Bank OZK's current payout ratio is 29%. This means it paid out 29% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, OZK expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $4.50 per share, with earnings expected to increase 0.67% from the year ago period.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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 OZK is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

Where Will Stocks Go…

If Biden Wins? If Trump Wins?

The answers may surprise you.

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