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 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.
Camden National in Focus
Based in Camden, Camden National (CAC - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 4.49%. The bank is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 2.73% compared to the Banks - Northeast industry's yield of 1.52% and the S&P 500's yield of 1.77%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.20 is up 30.4% from last year. Over the last 5 years, Camden National has increased its dividend 3 times on a year-over-year basis for an average annual increase of 7.35%. 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, Camden National's payout ratio is 34%, which means it paid out 34% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CAC for this fiscal year. The Zacks Consensus Estimate for 2018 is $3.30 per share, which represents a year-over-year growth rate of 20.88%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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, CAC 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).