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Why First Guaranty Bancshares (FGBI) is a Top Dividend Stock for Your Portfolio

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

First Guaranty Bancshares in Focus

Headquartered in Hammond, First Guaranty Bancshares (FGBI - Free Report) is a Finance stock that has seen a price change of 16.78% so far this year. Currently paying a dividend of $0.16 per share, the company has a dividend yield of 2.69%. In comparison, the Banks - Southeast industry's yield is 1.97%, while the S&P 500's yield is 1.45%.

In terms of dividend growth, the company's current annualized dividend of $0.64 is up 7.4% from last year. Over the last 5 years, 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.

FGBI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $2.59 per share, with earnings expected to increase 7.02% from the year ago period.

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. 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FGBI 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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