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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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Farmers National Banc in Focus
Based in Canfield, Farmers National Banc (FMNB) is in the Finance sector, and so far this year, shares have seen a price change of -10.17%. The bank is currently shelling out a dividend of $0.1 per share, with a dividend yield of 2.73%. This compares to the Banks - Midwest industry's yield of 2.67% and the S&P 500's yield of 2.08%.
In terms of dividend growth, the company's current annualized dividend of $0.40 is up 5.3% from last year. Over the last 5 years, Farmers National Banc has increased its dividend 4 times on a year-over-year basis for an average annual increase of 33.24%. 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. Farmers National's current payout ratio is 31%. This means it paid out 31% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FMNB expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $1.36 per share, which represents a year-over-year growth rate of 5.43%.
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. 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 FMNB 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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Farmers National Banc Corp. (FMNB) : Free Stock Analysis Report
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