Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Eagle Bancorp Montana in Focus
Eagle Bancorp Montana (EBMT - Free Report) is headquartered in Helena, and is in the Finance sector. The stock has seen a price change of 4.24% since the start of the year. Currently paying a dividend of $0.09 per share, the company has a dividend yield of 2.15%. In comparison, the Banks - Midwest industry's yield is 2.53%, while the S&P 500's yield is 1.93%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.37 is up 1.4% from last year. Eagle Bancorp Montana has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.63%. 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. Eagle Bancorp Montana's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
EBMT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $1.61 per share, with earnings expected to increase 50.47% 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EBMT presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).