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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Glacier Bancorp in Focus
Headquartered in Kalispell, Glacier Bancorp (GBCI - Free Report) is a Finance stock that has seen a price change of 6.59% so far this year. The bank holding company is currently shelling out a dividend of $0.26 per share, with a dividend yield of 2.46%. This compares to the Banks - West industry's yield of 1.86% and the S&P 500's yield of 1.87%.
In terms of dividend growth, the company's current annualized dividend of $1.04 is up 3% from last year. In the past five-year period, Glacier Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.10%. 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, Glacier Bancorp's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, GBCI expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.42 per share, with earnings expected to increase 11.52% 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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, GBCI 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).