Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Brookline Bancorp in Focus
Based in Boston, Brookline Bancorp (BRKL - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 8.32%. The bank holding company is currently shelling out a dividend of $0.1 per share, with a dividend yield of 2.81%. This compares to the Financial - Savings and Loan industry's yield of 2.24% and the S&P 500's yield of 1.93%.
Looking at dividend growth, the company's current annualized dividend of $0.42 is up 6.3% from last year. Brookline Bancorp has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 3.72%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Brookline's payout ratio is 39%, which means it paid out 39% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BRKL expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $1.10 per share, with earnings expected to increase 2.80% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BRKL 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).