All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Sierra Bancorp in Focus
Sierra Bancorp (BSRR - Free Report) is headquartered in Porterville, and is in the Finance sector. The stock has seen a price change of 8.99% since the start of the year. The parent company of Bank of the Sierra is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 2.75% compared to the Banks - West industry's yield of 2.05% and the S&P 500's yield of 1.93%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.72 is up 12.5% from last year. Over the last 5 years, Sierra Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 16.29%. 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. Sierra Bancorp's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BSRR for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.25 per share, which represents a year-over-year growth rate of 17.19%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BSRR presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).