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.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
South State in Focus
Headquartered in Columbia, South State (SSB - Free Report) is a Finance stock that has seen a price change of 29.36% so far this year. Currently paying a dividend of $0.43 per share, the company has a dividend yield of 2.22%. In comparison, the Banks - Southeast industry's yield is 1.89%, while the S&P 500's yield is 1.88%.
Looking at dividend growth, the company's current annualized dividend of $1.72 is up 24.6% from last year. South State has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 12.96%. 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. South State's current payout ratio is 30%, meaning it paid out 30% of its trailing 12-month EPS as dividend.
SSB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $5.53 per share, which represents a year-over-year growth rate of 0.45%.
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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, SSB 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).