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Are You Looking for a High-Growth Dividend Stock? Farmers & Merchants Bancorp Inc. (FMAO) 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. However, 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 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.

Farmers & Merchants Bancorp Inc. In Focus

Headquartered in Archbold, Farmers & Merchants Bancorp Inc. (FMAO - Free Report) is a Finance stock that has seen a price change of 3.72% so far this year. Currently paying a dividend of $0.19 per share, the company has a dividend yield of 2.23%. In comparison, the Banks - Northeast industry's yield is 2.24%, while the S&P 500's yield is 1.43%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.76 is up 7% from last year. Farmers & Merchants Bancorp Inc. has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.24%. 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. Farmers & Merchants Bancorp Inc.'s current payout ratio is 34%. This means it paid out 34% of its trailing 12-month EPS as dividend.

FMAO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $2.37 per share, which represents a year-over-year growth rate of 3.95%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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. That said, they can take comfort from the fact that FMAO 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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