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This is Why Cambridge (CATC) 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 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.

Cambridge in Focus

Based in Cambridge, Cambridge (CATC - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -10.95%. Currently paying a dividend of $0.64 per share, the company has a dividend yield of 3.07%. In comparison, the Banks - Northeast industry's yield is 2.5%, while the S&P 500's yield is 1.69%.

In terms of dividend growth, the company's current annualized dividend of $2.56 is up 7.6% from last year. In the past five-year period, Cambridge has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.68%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Cambridge's current payout ratio is 33%. This means it paid out 33% of its trailing 12-month EPS as dividend.

CATC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $7.97 per share, with earnings expected to increase 2.05% from the year ago period.

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 have to be mindful 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 CATC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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