Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Lakeland Financial in Focus
Headquartered in Warsaw, Lakeland Financial (LKFN - Free Report) is a Finance stock that has seen a price change of 11.01% so far this year. The holding company for Lake City Bank is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 2.69% compared to the Banks - Midwest industry's yield of 2.62% and the S&P 500's yield of 2.04%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.20 is up 9.1% from last year. Over the last 5 years, 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. Right now, Lakeland Financial's payout ratio is 32%, which means it paid out 32% of its trailing 12-month EPS as dividend.
LKFN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.29 per share, with earnings expected to increase 5.11% 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. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).