Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
CNB Financial in Focus
Based in Clearfield, CNB Financial (CCNE - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 7.97%. The bank holding company is currently shelling out a dividend of $0.17 per share, with a dividend yield of 2.74%. This compares to the Banks - Northeast industry's yield of 1.7% and the S&P 500's yield of 2%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.68 is up 1.5% from last year. CNB Financial has increased its dividend 1 times on a year-over-year basis over the last 5 years for an average annual increase of 0.32%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. CNB's current payout ratio is 33%. This means it paid out 33% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CCNE expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.53 per share, with earnings expected to increase 14.48% 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.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CCNE is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).