Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
BankFinancial in Focus
BankFinancial (BFIN - Free Report) is headquartered in Burr Ridge, and is in the Finance sector. The stock has seen a price change of 1.87% since the start of the year. The bank holding company is currently shelling out a dividend of $0.1 per share, with a dividend yield of 2.63%. This compares to the Financial - Savings and Loan industry's yield of 2.31% and the S&P 500's yield of 1.91%.
In terms of dividend growth, the company's current annualized dividend of $0.40 is up 8.1% from last year. In the past five-year period, BankFinancial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 51.15%. 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. BankFinancial's current payout ratio is 47%, meaning it paid out 47% of its trailing 12-month EPS as dividend.
BFIN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $0.98 per share, which represents a year-over-year growth rate of 13.95%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. 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 BFIN is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).