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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
LCNB in Focus
Based in Lebanon, LCNB (LCNB) is in the Finance sector, and so far this year, shares have seen a price change of -17.98%. The holding company for LCNB National Bank is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 4.55% compared to the Banks - Northeast industry's yield of 1.86% and the S&P 500's yield of 2.07%.
Looking at dividend growth, the company's current annualized dividend of $0.72 is up 4.3% from last year. Over the last 5 years, LCNB has increased its dividend 2 times on a year-over-year basis for an average annual increase of 1.71%. 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. LCNB's current payout ratio is 49%. This means it paid out 49% of its trailing 12-month EPS as dividend.
LCNB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $1.52 per share, which represents a year-over-year growth rate of 4.11%.
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.
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. 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, LCNB 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).