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.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Civista Bancshares in Focus
Civista Bancshares (CIVB - Free Report) is headquartered in Sandusky, and is in the Finance sector. The stock has seen a price change of 19.81% since the start of the year. The bank holding company is currently shelling out a dividend of $0.11 per share, with a dividend yield of 2.11%. This compares to the Banks - Midwest industry's yield of 2.54% and the S&P 500's yield of 1.94%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.44 is up 37.5% from last year. In the past five-year period, Civista Bancshares has increased its dividend 3 times on a year-over-year basis for an average annual increase of 16.73%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Civista Bancshares's current payout ratio is 23%, meaning it paid out 23% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CIVB for this fiscal year. The Zacks Consensus Estimate for 2019 is $2 per share, which represents a year-over-year growth rate of 8.11%.
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.
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. 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, 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).