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S&T Bancorp (STBA) Could Be a Great Choice
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
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 1.05% since the start of the year. Currently paying a dividend of $0.3 per share, the company has a dividend yield of 3.77%. In comparison, the Banks - Northeast industry's yield is 2.64%, while the S&P 500's yield is 1.79%.
Taking a look at the company's dividend growth, its 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 5.08%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. S&T Bancorp's current payout ratio is 43%, meaning 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 $3.10 per share, which represents a year-over-year growth rate of 10.32%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, STBA presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).