Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
Silvercrest in Focus
Silvercrest (SAMG - Free Report) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of -30.37% since the start of the year. The investment company is paying out a dividend of $0.15 per share at the moment, with a dividend yield of 7.31% compared to the Financial - Investment Management industry's yield of 3.06% and the S&P 500's yield of 2.51%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.64 is up 6.7% from last year. Over the last 5 years, Silvercrest has increased its dividend 2 times on a year-over-year basis for an average annual increase of 5.95%. 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, Silvercrest's payout ratio is 50%, which means it paid out 50% of its trailing 12-month EPS as dividend.
SAMG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $1.44 per share, which represents a year-over-year growth rate of 23.08%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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, SAMG 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).