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.
Brookline Bancorp in Focus
Headquartered in Boston, Brookline Bancorp (BRKL - Free Report) is a Finance stock that has seen a price change of -7.78% so far this year. The bank holding company is paying out a dividend of $0.12 per share at the moment, with a dividend yield of 3.03% compared to the Financial - Savings and Loan industry's yield of 2.43% and the S&P 500's yield of 1.77%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.46 is up 4.5% from last year. Over the last 5 years, Brookline Bancorp has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.42%. 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. Brookline's current payout ratio is 40%. This means it paid out 40% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BRKL expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $1.20 per share, representing a year-over-year earnings growth rate of 9.09%.
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. With that in mind, BRKL 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).