Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Park National in Focus
Based in Newark, Park National (PRK - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 5.58%. Currently paying a dividend of $0.96 per share, the company has a dividend yield of 3.5%. In comparison, the Banks - Midwest industry's yield is 1.81%, while the S&P 500's yield is 1.78%.
In terms of dividend growth, the company's current annualized dividend of $3.84 is up 36.2% from last year. In the past five-year period, Park National has increased its dividend 1 times on a year-over-year basis for an average annual increase of 0.12%. 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. Park National's current payout ratio is 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.
PRK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $7.15 per share, which represents a year-over-year growth rate of 30.71%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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 must be conscious 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 PRK is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).