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.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Colony Bankcorp in Focus
Based in Fitzgerald, Colony Bankcorp (CBAN) is in the Finance sector, and so far this year, shares have seen a price change of -19.78%. The bank holding company is paying out a dividend of $0.11 per share at the moment, with a dividend yield of 4.32% compared to the Banks - Southeast industry's yield of 3.05% and the S&P 500's yield of 1.65%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.44 is up 2.3% from last year. Over the last 5 years, Colony Bankcorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 14.86%. 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. Colony Bankcorp's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CBAN expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $1.31 per share, with earnings expected to increase 2.34% from the year ago period.
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. That said, they can take comfort from the fact that CBAN is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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