All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
TriCo in Focus
Headquartered in Chico, TriCo (TCBK - Free Report) is a Finance stock that has seen a price change of 12.19% so far this year. The holding company for Tri Counties Bank is paying out a dividend of $0.19 per share at the moment, with a dividend yield of 2% compared to the Banks - West industry's yield of 2.01% and the S&P 500's yield of 2.03%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.76 is up 8.6% from last year. TriCo has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 12.35%. 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. TriCo's current payout ratio is 28%. This means it paid out 28% of its trailing 12-month EPS as dividend.
TCBK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.01 per share, which represents a year-over-year growth rate of 11.90%.
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, TCBK 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).