Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
CNB Financial in Focus
CNB Financial (CCNE - Free Report) is headquartered in Clearfield, and is in the Finance sector. The stock has seen a price change of 19.61% since the start of the year. Currently paying a dividend of $0.17 per share, the company has a dividend yield of 2.48%. In comparison, the Banks - Northeast industry's yield is 1.8%, while the S&P 500's yield is 1.88%.
In terms of dividend growth, the company's current annualized dividend of $0.68 is up 1.5% from last year. CNB Financial has increased its dividend 1 times on a year-over-year basis over the last 5 years for an average annual increase of 0.58%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, CNB's payout ratio is 29%, which means it paid out 29% of its trailing 12-month EPS as dividend.
CCNE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.48 per share, representing a year-over-year earnings growth rate of 12.22%.
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. That said, they can take comfort from the fact that CCNE is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).