Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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.
Western New England Bancorp in Focus
Western New England Bancorp (WNEB - Free Report) is headquartered in Westfield, and is in the Finance sector. The stock has seen a price change of -2.89% since the start of the year. Currently paying a dividend of $0.05 per share, the company has a dividend yield of 2.05%. In comparison, the Banks - Foreign industry's yield is 3.23%, while the S&P 500's yield is 1.9%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.20 is up 25% from last year. In the past five-year period, Western New England Bancorp has increased its dividend 2 times on a year-over-year basis for an average annual increase of 0.26%. 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, Western New England Bancorp's payout ratio is 28%, which means it paid out 28% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, WNEB expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $0.57 per share, with earnings expected to increase 1.79% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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 WNEB is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).