All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
LCNB in Focus
LCNB (LCNB) is headquartered in Lebanon, and is in the Finance sector. The stock has seen a price change of -17.2% since the start of the year. 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 4.51% compared to the Banks - Northeast industry's yield of 2.37% and the S&P 500's yield of 2.51%.
In terms of dividend growth, the company's current annualized dividend of $0.72 is up 4.3% from last year. In the past five-year period, LCNB has increased its dividend 2 times on a year-over-year basis for an average annual increase of 1.71%. 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. Right now, LCNB's payout ratio is 49%, which means it paid out 49% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for LCNB for this fiscal year. 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 many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).