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This is Why SB Financial (SBFG) is a Great Dividend Stock

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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.

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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

SB Financial in Focus

SB Financial (SBFG - Free Report) is headquartered in Defiance, and is in the Finance sector. The stock has seen a price change of 1.15% since the start of the year. Currently paying a dividend of $0.09 per share, the company has a dividend yield of 2.16%. In comparison, the Banks - Northeast industry's yield is 1.89%, while the S&P 500's yield is 1.93%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.36 is up 12.5% from last year. Over the last 5 years, SB Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 17.83%. 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, SB Financial's payout ratio is 23%, which means it paid out 23% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for SBFG for this fiscal year. The Zacks Consensus Estimate for 2019 is $1.64 per share, representing a year-over-year earnings growth rate of 8.61%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, SBFG 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).

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