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 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.
Sierra Bancorp in Focus
Sierra Bancorp (BSRR - Free Report) is headquartered in Porterville, and is in the Finance sector. The stock has seen a price change of 12.69% since the start of the year. The parent company of Bank of the Sierra is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 2.66% compared to the Banks - West industry's yield of 1.85% and the S&P 500's yield of 1.95%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.72 is up 12.5% from last year. In the past five-year period, Sierra Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 16.29%. 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. Sierra Bancorp's current payout ratio is 35%, meaning it paid out 35% of its trailing 12-month EPS as dividend.
BSRR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.25 per share, with earnings expected to increase 17.19% 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. 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BSRR 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).