All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Camden National in Focus
Based in Camden, Camden National (CAC - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 17.26%. The bank is currently shelling out a dividend of $0.3 per share, with a dividend yield of 2.85%. This compares to the Banks - Northeast industry's yield of 1.72% and the S&P 500's yield of 1.92%.
In terms of dividend growth, the company's current annualized dividend of $1.20 is up 9.1% from last year. In the past five-year period, Camden National has increased its dividend 4 times on a year-over-year basis for an average annual increase of 11.02%. 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. Camden National's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.
CAC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.55 per share, with earnings expected to increase 4.72% 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. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CAC 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).