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This is Why First Guaranty Bancshares (FGBI) 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.

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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

First Guaranty Bancshares in Focus

Based in Hammond, First Guaranty Bancshares (FGBI - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 6.23%. The bank holding company is currently shelling out a dividend of $0.16 per share, with a dividend yield of 2.96%. This compares to the Banks - Southeast industry's yield of 1.85% and the S&P 500's yield of 1.42%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.64 is up 7.4% from last year. In the past five-year period, First Guaranty Bancshares has increased its dividend 2 times on a year-over-year basis for an average annual increase of 2.03%. 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. First Guaranty Bancshares's current payout ratio is 26%. This means it paid out 26% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for FGBI for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.56 per share, which represents a year-over-year growth rate of 5.79%.

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. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that FGBI is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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