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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Stock Yards Bancorp in Focus
Based in Louisville, Stock Yards Bancorp (SYBT - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 8.08%. 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 2.82%. This compares to the Banks - Southeast industry's yield of 1.62% and the S&P 500's yield of 1.96%.
Looking at dividend growth, the company's current annualized dividend of $1 is up 4.2% 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 12.85%. 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, Stock Yards's payout ratio is 41%, which means it paid out 41% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SYBT for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.52 per share, with earnings expected to increase 4.13% 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. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that SYBT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).