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This is Why S&T Bancorp (STBA) is a Great Dividend Stock
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
S&T Bancorp in Focus
S&T Bancorp (STBA - Free Report) is headquartered in Indiana, and is in the Finance sector. The stock has seen a price change of -6.63% since the start of the year. Currently paying a dividend of $0.3 per share, the company has a dividend yield of 4.08%. In comparison, the Banks - Northeast industry's yield is 2.5%, while the S&P 500's yield is 1.68%.
In terms of dividend growth, the company's current annualized dividend of $1.20 is up 6.2% from last year. S&T Bancorp has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 6.24%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, S&T Bancorp's payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for STBA for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.84 per share, with earnings expected to increase 1.07% from the year ago period.
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.
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 STBA is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).