Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Peoples Bancorp in Focus
Peoples Bancorp (PEBO - Free Report) is headquartered in Marietta, and is in the Finance sector. The stock has seen a price change of -6.78% since the start of the year. The financial services and products company is currently shelling out a dividend of $0.34 per share, with a dividend yield of 4.21%. This compares to the Banks - Midwest industry's yield of 2.5% and the S&P 500's yield of 1.76%.
Looking at dividend growth, the company's current annualized dividend of $1.36 is up 3% from last year. Peoples Bancorp has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 23.37%. 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. Peoples Bancorp's current payout ratio is 45%. This means it paid out 45% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PEBO expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $2.82 per share, representing a year-over-year earnings growth rate of 6.42%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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, PEBO 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).