Farmers & Merchants Bancorp Inc. (FMAO) is a Top Dividend Stock Right Now: Should You Buy?
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.
Farmers & Merchants Bancorp Inc. In Focus
Based in Archbold, Farmers & Merchants Bancorp Inc. (FMAO) is in the Finance sector, and so far this year, shares have seen a price change of 13.04%. The company is paying out a dividend of $0.19 per share at the moment, with a dividend yield of 2.05% compared to the Banks - Northeast industry's yield of 2.28% and the S&P 500's yield of 1.53%.
Looking at dividend growth, the company's current annualized dividend of $0.76 is up 7% from last year. Farmers & Merchants Bancorp Inc. has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 8.82%. 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, Farmers & Merchants Bancorp Inc.'s payout ratio is 31%, which means it paid out 31% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FMAO for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.56 per share, which represents a year-over-year growth rate of 12.28%.
Bottom Line
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. That said, they can take comfort from the fact that FMAO is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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