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 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.
Two River Bancorp in Focus
Based in Tinton Falls, Two River Bancorp is in the Finance sector, and so far this year, shares have seen a price change of -10.29%. The bank holding company is currently shelling out a dividend of $0.07 per share, with a dividend yield of 2.05%. This compares to the Banks - Northeast industry's yield of 1.83% and the S&P 500's yield of 1.87%.
Looking at dividend growth, the company's current annualized dividend of $0.28 is up 40% from last year. In the past five-year period, Two River Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 18.43%. 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, Two River Bancorp's payout ratio is 17%, which means it paid out 17% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, TRCB expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $1.35 per share, which represents a year-over-year growth rate of 3.05%.
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.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, TRCB 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).