All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Civista Bancshares in Focus
Headquartered in Sandusky, Civista Bancshares (CIVB - Free Report) is a Finance stock that has seen a price change of 25.26% so far this year. Currently paying a dividend of $0.11 per share, the company has a dividend yield of 2.02%. In comparison, the Banks - Midwest industry's yield is 2.56%, while the S&P 500's yield is 2.03%.
Looking at dividend growth, the company's current annualized dividend of $0.44 is up 37.5% from last year. Civista Bancshares has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 14.09%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Civista Bancshares's payout ratio is 19%, which means it paid out 19% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CIVB for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.02 per share, which represents a year-over-year growth rate of 9.19%.
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CIVB 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).