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 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.
Access National in Focus
Headquartered in Reston, Access National (ANCX - Free Report) is a Finance stock that has seen a price change of 4.06% so far this year. The parent company of Access National Bank is paying out a dividend of $0.16 per share at the moment, with a dividend yield of 2.21% compared to the Banks - Southeast industry's yield of 1.39% and the S&P 500's yield of 1.88%.
Looking at dividend growth, the company's current annualized dividend of $0.64 is up 6.7% from last year. Over the last 5 years, Access National has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.87%. 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. Right now, Access National's payout ratio is 36%, which means it paid out 36% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ANCX for this fiscal year. The Zacks Consensus Estimate for 2018 is $1.65 per share, with earnings expected to increase 51.38% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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 ANCX is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).