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Are You Looking for a High-Growth Dividend Stock?

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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. But 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 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

First Guaranty Bancshares (FGBI - Free Report) is headquartered in Hammond, and is in the Finance sector. The stock has seen a price change of 20.76% since the start of the year. Currently paying a dividend of $0.16 per share, the company has a dividend yield of 2.6%. In comparison, the Banks - Southeast industry's yield is 2.18%, while the S&P 500's yield is 1.74%.

Looking at 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 25%, meaning it paid out 25% 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 $2.75 per share, which represents a year-over-year growth rate of 13.64%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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 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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