Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
Camden National in Focus
Camden National (CAC - Free Report) is headquartered in Camden, and is in the Finance sector. The stock has seen a price change of 21.66% since the start of the year. The bank is currently shelling out a dividend of $0.3 per share, with a dividend yield of 2.74%. This compares to the Banks - Northeast industry's yield of 1.79% and the S&P 500's yield of 1.89%.
Looking at dividend growth, the company's current annualized dividend of $1.20 is up 9.1% from last year. In the past five-year period, Camden National has increased its dividend 4 times on a year-over-year basis for an average annual increase of 11.58%. 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. Right now, Camden National's payout ratio is 34%, which means it paid out 34% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CAC for this fiscal year. The Zacks Consensus Estimate for 2019 is $3.75 per share, representing a year-over-year earnings growth rate of 10.62%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CAC 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).