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Cambridge (CATC) is a Top Dividend Stock Right Now: Should You Buy?

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Cambridge in Focus

Cambridge (CATC - Free Report) is headquartered in Cambridge, and is in the Finance sector. The stock has seen a price change of -11.68% since the start of the year. Currently paying a dividend of $0.64 per share, the company has a dividend yield of 3.1%. In comparison, the Banks - Northeast industry's yield is 2.41%, while the S&P 500's yield is 1.6%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.56 is up 7.6% from last year. Cambridge has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.68%. 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. Cambridge's current payout ratio is 33%, meaning 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

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.

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 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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