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This is Why Salisbury Bancorp (SAL) is a Great Dividend Stock

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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 for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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.

Salisbury Bancorp in Focus

Salisbury Bancorp is headquartered in Lakeville, and is in the Finance sector. The stock has seen a price change of 33.54% since the start of the year. Currently paying a dividend of $0.3 per share, the company has a dividend yield of 2.41%. In comparison, the Banks - Northeast industry's yield is 2.02%, while the S&P 500's yield is 1.37%.

In terms of dividend growth, the company's current annualized dividend of $1.20 is up 3.4% from last year. Salisbury Bancorp has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 1.09%. 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. Right now, Salisbury Bancorp's payout ratio is 21%, which means it paid out 21% of its trailing 12-month EPS as dividend.

SAL is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $5.92 per share, representing a year-over-year earnings growth rate of 40.95%.

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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, SAL 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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