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Bar Harbor Bankshares (BHB) is a Top Dividend Stock Right Now: Should You Buy?

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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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Bar Harbor Bankshares in Focus

Bar Harbor Bankshares (BHB - Free Report) is headquartered in Bar Harbor, and is in the Finance sector. The stock has seen a price change of 26.87% since the start of the year. The bank is paying out a dividend of $0.24 per share at the moment, with a dividend yield of 3.35% compared to the Banks - Northeast industry's yield of 1.95% and the S&P 500's yield of 1.35%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.96 is up 9.1% from last year. In the past five-year period, Bar Harbor Bankshares has increased its dividend 4 times on a year-over-year basis for an average annual increase of 5.47%. 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, Bar Harbor's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, BHB expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.58 per share, which represents a year-over-year growth rate of 12.66%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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. With that in mind, BHB 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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