Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
LegacyTexas Financial Group in Focus
Headquartered in Plano, LegacyTexas Financial Group is a Finance stock that has seen a price change of 24.59% so far this year. The holding company for LegacyTexas Bank is paying out a dividend of $0.25 per share at the moment, with a dividend yield of 2.5% compared to the Financial - Savings and Loan industry's yield of 2.26% and the S&P 500's yield of 1.94%.
In terms of dividend growth, the company's current annualized dividend of $1 is up 42.9% from last year. LegacyTexas Financial Group has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 11.36%. 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, LegacyTexas's payout ratio is 33%, which means it paid out 33% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, LTXB expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.15 per share, with earnings expected to increase 8.62% 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. It's important to keep in mind that not all companies provide 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. With that in mind, LTXB 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).