Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Camden National in Focus
Based in Camden, Camden National is in the Finance sector, and so far this year, shares have seen a price change of 22.1%. Currently paying a dividend of $0.3 per share, the company has a dividend yield of 2.73%. In comparison, the Banks - Northeast industry's yield is 1.91%, while the S&P 500's yield is 1.95%.
Looking at dividend growth, the company's current annualized dividend of $1.20 is up 9.1% from last year. In the past five-year period, Camden National has increased its dividend 4 times on a year-over-year basis for an average annual increase of 11.02%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Camden National's current payout ratio is 34%, meaning it paid out 34% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CAC for this fiscal year. The Zacks Consensus Estimate for 2019 is $3.75 per share, which represents a year-over-year growth rate of 10.62%.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CAC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).