Back to top

Image: Bigstock

Why Community Bank System (CBU) is a Great Dividend Stock Right Now

Read MoreHide Full Article

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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Community Bank System in Focus

Headquartered in Dewitt, Community Bank System (CBU - Free Report) is a Finance stock that has seen a price change of -2% so far this year. The bank holding company is currently shelling out a dividend of $0.41 per share, with a dividend yield of 2.36%. This compares to the Banks - Northeast industry's yield of 1.78% and the S&P 500's yield of 1.78%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.64 is up 3.8% from last year. In the past five-year period, Community Bank System has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.84%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Community Bank's current payout ratio is 49%. This means it paid out 49% of its trailing 12-month EPS as dividend.

CBU is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $3.30 per share, with earnings expected to increase 0.30% from the year ago period.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. 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 CBU is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Community Bank System, Inc. (CBU) - free report >>

Published in