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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Civista Bancshares in Focus
Headquartered in Sandusky, Civista Bancshares (CIVB - Free Report) is a Finance stock that has seen a price change of 23.02% so far this year. Currently paying a dividend of $0.11 per share, the company has a dividend yield of 2.05%. In comparison, the Banks - Midwest industry's yield is 2.54%, while the S&P 500's yield is 1.87%.
In terms of dividend growth, the company's current annualized dividend of $0.44 is up 37.5% from last year. Over the last 5 years, Civista Bancshares has increased its dividend 3 times on a year-over-year basis for an average annual increase of 16.73%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Civista Bancshares's payout ratio is 19%, which means it paid out 19% of its trailing 12-month EPS as dividend.
CIVB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.02 per share, with earnings expected to increase 9.19% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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, CIVB 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).