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 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.
OceanFirst Financial in Focus
Based in Red Bank, OceanFirst Financial (OCFC - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 9.95%. The holding company for OceanFirst Bank is paying out a dividend of $0.17 per share at the moment, with a dividend yield of 2.75% compared to the Financial - Savings and Loan industry's yield of 2.29% and the S&P 500's yield of 1.96%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.68 is up 9.7% from last year. Over the last 5 years, OceanFirst Financial has increased its dividend 3 times on a year-over-year basis for an average annual increase of 6.74%. 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. OceanFirst's current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, OCFC expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.19 per share, which represents a year-over-year growth rate of 10.61%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that OCFC is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).