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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
CNB Financial in Focus
CNB Financial (CCNE - Free Report) is headquartered in Clearfield, and is in the Finance sector. The stock has seen a price change of 19.91% since the start of the year. The bank holding company is paying out a dividend of $0.17 per share at the moment, with a dividend yield of 2.47% compared to the Banks - Northeast industry's yield of 1.67% and the S&P 500's yield of 1.94%.
Looking at dividend growth, the company's 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. Right now, CNB's payout ratio is 31%, which means it paid out 31% of its trailing 12-month EPS as dividend.
CCNE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.53 per share, which represents a year-over-year growth rate of 14.48%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. 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, 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).