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First Guaranty Bancshares (FGBI) Could Be a Great Choice

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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. 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

Based in Hammond, First Guaranty Bancshares (FGBI - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 23.26%. Currently paying a dividend of $0.16 per share, the company has a dividend yield of 2.55%. In comparison, the Banks - Southeast industry's yield is 2.16%, while the S&P 500's yield is 1.62%.

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%. 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. First Guaranty Bancshares's current payout ratio is 25%. This means it paid out 25% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, FGBI expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $2.75 per share, which represents a year-over-year growth rate of 13.64%.

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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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