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Why BancorpSouth (BXS) is a Top Dividend Stock for Your Portfolio

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.

BancorpSouth in Focus

Based in Tupelo, BancorpSouth (BXS - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 10.42%. Currently paying a dividend of $0.19 per share, the company has a dividend yield of 2.51%. In comparison, the Banks - Southeast industry's yield is 2.01%, while the S&P 500's yield is 1.27%.

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 28%, meaning it paid out 28% of its trailing 12-month EPS as dividend.

BXS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $2.31 per share, with earnings expected to increase 8.96% from the year ago period.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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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