All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
BankFinancial in Focus
Based in Burr Ridge, BankFinancial (BFIN - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -0.6%. Currently paying a dividend of $0.1 per share, the company has a dividend yield of 2.69%. In comparison, the Financial - Savings and Loan industry's yield is 2.27%, while the S&P 500's yield is 1.93%.
Taking a look at the company's dividend growth, its 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%. Looking ahead, future dividend growth will be dependent on earnings growth and 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%. This means 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 $0.97 per share, with earnings expected to increase 12.79% 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 have to be mindful 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).