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 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.
Bank of Marin in Focus
Bank of Marin (BMRC) is headquartered in Novato, and is in the Finance sector. The stock has seen a price change of -3.02% since the start of the year. Currently paying a dividend of $0.23 per share, the company has a dividend yield of 2.11%. In comparison, the Banks - West industry's yield is 2%, while the S&P 500's yield is 1.78%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.92 is up 15% from last year. Bank of Marin has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 14.67%. 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. Bank of Marin's current payout ratio is 34%. This means it paid out 34% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BMRC for this fiscal year. The Zacks Consensus Estimate for 2020 is $2.51 per share, with earnings expected to increase 1.21% from the year ago period.
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.
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. That said, they can take comfort from the fact that BMRC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).