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.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Camden National in Focus
Headquartered in Camden, Camden National is a Finance stock that has seen a price change of 30.4% so far this year. Currently paying a dividend of $2.63 per share, the company has a dividend yield of 33%. In comparison, the Banks - Northeast industry's yield is 20.88%, while the S&P 500's yield is 0.3%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.63 is up 7.4% from last year. In the past five-year period, Camden National has increased its dividend 8.70 times on a year-over-year basis for an average annual increase of 3%. 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. Camden National's current payout ratio is 8.09%, meaning it paid out 8.09% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CAC expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $1.20 per share, with earnings expected to increase 3.55% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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 have to be mindful 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).