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.
Investors Bancorp in Focus
Investors Bancorp (ISBC) is headquartered in Short Hills, and is in the Finance sector. The stock has seen a price change of -8.18% since the start of the year. Currently paying a dividend of $0.12 per share, the company has a dividend yield of 4.39%. In comparison, the Financial - Savings and Loan industry's yield is 2.41%, while the S&P 500's yield is 1.92%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.48 is up 9.1% from last year. In the past five-year period, Investors Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 21.43%. 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. Right now, Investors Bancorp's payout ratio is 56%, which means it paid out 56% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ISBC expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $0.95 per share, representing a year-over-year earnings growth rate of 23.38%.
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.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, ISBC presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).