Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Central Valley Community Bancorp in Focus
Based in Fresno, Central Valley Community Bancorp (CVCY - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 5.88%. The holding company for Central Valley Community Bank is currently shelling out a dividend of $0.11 per share, with a dividend yield of 2.2%. This compares to the Banks - West industry's yield of 2.06% and the S&P 500's yield of 1.95%.
Looking at dividend growth, the company's current annualized dividend of $0.44 is up 41.9% from last year. In the past five-year period, Central Valley Community Bancorp has increased its dividend 3 times on a year-over-year basis for an average annual increase of 11.53%. 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. Central Valley Community Bancorp's current payout ratio is 26%. This means it paid out 26% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CVCY expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $1.57 per share, which represents a year-over-year growth rate of 1.95%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. 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, CVCY 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).