Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Central Pacific Financial in Focus
Central Pacific Financial (CPF - Free Report) is headquartered in Honolulu, and is in the Finance sector. The stock has seen a price change of 18.07% since the start of the year. The operator of Central Pacific Bank is paying out a dividend of $0.21 per share at the moment, with a dividend yield of 2.92% compared to the Banks - West industry's yield of 1.97% and the S&P 500's yield of 1.93%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.84 is up 2.4% from last year. In the past five-year period, Central Pacific Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 22.09%. 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. Right now, Central Pacific Financial's payout ratio is 42%, which means it paid out 42% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CPF for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.12 per share, with earnings expected to increase 5.47% 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. 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, CPF presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).