All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
National Bank Holdings in Focus
National Bank Holdings (NBHC - Free Report) is headquartered in Greenwood Village, and is in the Finance sector. The stock has seen a price change of 8.84% since the start of the year. The holding company for NBH Bank is currently shelling out a dividend of $0.19 per share, with a dividend yield of 2.26%. This compares to the Banks - Southeast industry's yield of 1.85% and the S&P 500's yield of 1.95%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.76 is up 40.7% from last year. Over the last 5 years, National Bank Holdings has increased its dividend 3 times on a year-over-year basis for an average annual increase of 36.45%. 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. National Bank Holdings's current payout ratio is 32%, meaning it paid out 32% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for NBHC for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.42 per share, representing a year-over-year earnings growth rate of 12.04%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. 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, NBHC 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).