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Are You Looking for a High-Growth Dividend Stock? Bar Harbor Bankshares (BHB) Could Be a Great Choice

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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.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Bar Harbor Bankshares in Focus

Headquartered in Bar Harbor, Bar Harbor Bankshares (BHB - Free Report) is a Finance stock that has seen a price change of 24.17% so far this year. The bank is paying out a dividend of $0.24 per share at the moment, with a dividend yield of 3.42% compared to the Banks - Northeast industry's yield of 2.07% and the S&P 500's yield of 1.45%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.96 is up 9.1% from last year. Over the last 5 years, 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. Bar Harbor's current payout ratio is 38%. This means it paid out 38% of its trailing 12-month EPS as dividend.

BHB is expecting earnings to expand this fiscal year as well. 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.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, 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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