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
Brookline Bancorp (BRKL - Free Report) is headquartered in Boston, and is in the Finance sector. The stock has seen a price change of 10.2% since the start of the year. The bank holding company is paying out a dividend of $0.11 per share at the moment, with a dividend yield of 2.89% compared to the Financial - Savings and Loan industry's yield of 2.22% and the S&P 500's yield of 1.96%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.44 is up 11.4% 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. Brookline's current payout ratio is 39%. This means it paid out 39% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BRKL for this fiscal year. The Zacks Consensus Estimate for 2019 is $1.16 per share, representing a year-over-year earnings growth rate of 8.41%.
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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that BRKL is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).