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Why Preferred Bank (PFBC) is a Top Dividend Stock for Your Portfolio

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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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Preferred Bank in Focus

Preferred Bank (PFBC - Free Report) is headquartered in Los Angeles, and is in the Finance sector. The stock has seen a price change of 3.16% since the start of the year. The independent commercial bank is paying out a dividend of $0.43 per share at the moment, with a dividend yield of 2.32% compared to the Banks - West industry's yield of 2.57% and the S&P 500's yield of 1.58%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.72 is up 19.4% from last year. Over the last 5 years, Preferred Bank has increased its dividend 4 times on a year-over-year basis for an average annual increase of 15.92%. 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. Preferred Bank's current payout ratio is 24%. This means it paid out 24% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, PFBC expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $8.04 per share, which represents a year-over-year growth rate of 25.43%.

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. 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. With that in mind, PFBC presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).


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