Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
CNB Financial in Focus
Based in Clearfield, CNB Financial (CCNE - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 16.25%. The bank holding company is currently shelling out a dividend of $0.17 per share, with a dividend yield of 2.55%. This compares to the Banks - Northeast industry's yield of 1.84% and the S&P 500's yield of 1.93%.
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%. 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. CNB's current payout ratio is 28%, meaning it paid out 28% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CCNE expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.53 per share, representing a year-over-year earnings growth rate of 14.48%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).