Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.
BankFinancial in Focus
BankFinancial (BFIN - Free Report) is headquartered in Burr Ridge, and is in the Finance sector. The stock has seen a price change of 2.68% since the start of the year. Currently paying a dividend of $0.1 per share, the company has a dividend yield of 2.61%. In comparison, the Financial - Savings and Loan industry's yield is 2.24%, while the S&P 500's yield is 1.89%.
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 43.42%. 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. BankFinancial's current payout ratio is 45%. This means it paid out 45% 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 $0.98 per share, which represents a year-over-year growth rate of 13.95%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, BFIN 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).