Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Stock Yards Bancorp in Focus
Based in Louisville, Stock Yards Bancorp (SYBT - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 8.23%. The holding company for Stock Yards Bank & Trust Co. Is currently shelling out a dividend of $0.25 per share, with a dividend yield of 2.82%. This compares to the Banks - Southeast industry's yield of 1.69% and the S&P 500's yield of 1.87%.
In terms of dividend growth, the company's current annualized dividend of $1 is up 4.2% from last year. Stock Yards Bancorp has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 13%. 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. Stock Yards's current payout ratio is 40%. This means it paid out 40% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SYBT for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.57 per share, representing a year-over-year earnings growth rate of 6.20%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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, SYBT 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).