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 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.
Lakeland Financial in Focus
Lakeland Financial (LKFN - Free Report) is headquartered in Warsaw, and is in the Finance sector. The stock has seen a price change of 17.11% since the start of the year. Currently paying a dividend of $0.3 per share, the company has a dividend yield of 2.55%. In comparison, the Banks - Midwest industry's yield is 2.44%, while the S&P 500's yield is 1.95%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.20 is up 9.1% from last year. In the past five-year period, Lakeland Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.06%. 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. Lakeland Financial's current payout ratio is 32%, meaning it paid out 32% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, LKFN expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.30 per share, with earnings expected to increase 5.43% 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. 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. 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, LKFN 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).