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.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
First Defiance Financial in Focus
Headquartered in Defiance, First Defiance Financial is a Finance stock that has seen a price change of 15.67% so far this year. Currently paying a dividend of $0.19 per share, the company has a dividend yield of 2.68%. In comparison, the Financial - Savings and Loan industry's yield is 2.23%, while the S&P 500's yield is 1.88%.
In terms of dividend growth, the company's current annualized dividend of $0.76 is up 18.8% from last year. In the past five-year period, First Defiance Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 19.01%. 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. First Defiance's current payout ratio is 34%, meaning it paid out 34% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FDEF for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.37 per share, with earnings expected to increase 6.28% 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FDEF 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).