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This is Why BancorpSouth (BXS) is a Great Dividend Stock

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

BancorpSouth in Focus

Headquartered in Tupelo, BancorpSouth (BXS - Free Report) is a Finance stock that has seen a price change of 17.57% so far this year. The bank is paying out a dividend of $0.19 per share at the moment, with a dividend yield of 2.36% compared to the Banks - Southeast industry's yield of 1.98% and the S&P 500's yield of 1.33%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.76 is up 2% from last year. Over the last 5 years, BancorpSouth has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.99%. 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. BancorpSouth's current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, BXS expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.37 per share, which represents a year-over-year growth rate of 11.79%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BXS 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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