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Why Lakeland Financial (LKFN) is a Great Dividend Stock Right Now

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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 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 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.

Lakeland Financial in Focus

Headquartered in Warsaw, Lakeland Financial (LKFN - Free Report) is a Finance stock that has seen a price change of -17.82% so far this year. The holding company for Lake City Bank is currently shelling out a dividend of $0.4 per share, with a dividend yield of 2.43%. This compares to the Banks - Midwest industry's yield of 2.73% and the S&P 500's yield of 1.76%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.60 is up 17.6% from last year. Lakeland Financial has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 14.67%. 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. Lakeland Financial's current payout ratio is 43%. This means it paid out 43% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for LKFN for this fiscal year. The Zacks Consensus Estimate for 2022 is $3.93 per share, representing a year-over-year earnings growth rate of 5.08%.

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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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 LKFN 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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