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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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
Based in Greenwood Village, National Bank Holdings (NBHC - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 18.37%. Currently paying a dividend of $0.19 per share, the company has a dividend yield of 2.08%. In comparison, the Banks - Southeast industry's yield is 1.78%, while the S&P 500's yield is 1.94%.
Looking at dividend growth, the company's current annualized dividend of $0.76 is up 40.7% from last year. Over the last 5 years, National Bank Holdings has increased its dividend 3 times on a year-over-year basis for an average annual increase of 32.29%. 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. 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, which represents a year-over-year growth rate of 12.04%.
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.
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. That said, they can take comfort from the fact that NBHC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).