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 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.
National Bank Holdings in Focus
Headquartered in Greenwood Village, National Bank Holdings (NBHC - Free Report) is a Finance stock that has seen a price change of 13.77% so far this year. The holding company for NBH Bank is currently shelling out a dividend of $0.19 per share, with a dividend yield of 2.16%. This compares to the Banks - Southeast industry's yield of 1.77% and the S&P 500's yield of 2.04%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.76 is up 40.7% from last year. National Bank Holdings has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 32.29%. 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, National Bank Holdings's payout ratio is 30%, which means it paid out 30% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for NBHC for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.42 per share, representing a year-over-year earnings growth rate of 12.04%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, NBHC 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).