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 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.
Stock Yards Bancorp in Focus
Stock Yards Bancorp (SYBT - Free Report) is headquartered in Louisville, and is in the Finance sector. The stock has seen a price change of -4.91% since the start of the year. The holding company for Stock Yards Bank & Trust Co. Is currently shelling out a dividend of $0.25 per share, with a dividend yield of 2.79%. This compares to the Banks - Southeast industry's yield of 1.31% and the S&P 500's yield of 1.8%.
In terms of dividend growth, the company's current annualized dividend of $1 is up 25% from last year. Over the last 5 years, Stock Yards Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.67%. 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, Stock Yards's payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.
SYBT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $2.39 per share, which represents a year-over-year growth rate of 25.13%.
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, SYBT 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).