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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
First Defiance Financial in Focus
Headquartered in Defiance, First Defiance Financial (FDEF) is a Finance stock that has seen a price change of 21.75% so far this year. The holding company for First Federal Bank of the Midwest is currently shelling out a dividend of $0.19 per share, with a dividend yield of 2.55%. This compares to the Financial - Savings and Loan industry's yield of 2.24% and the S&P 500's yield of 1.87%.
In terms of dividend growth, the company's current annualized dividend of $0.76 is up 18.8% from last year. Over the last 5 years, First Defiance Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 18.91%. 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. First Defiance's current payout ratio is 31%, meaning it paid out 31% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FDEF for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.35 per share, which represents a year-over-year growth rate of 5.38%.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FDEF presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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First Defiance Financial Corp. (FDEF) : Free Stock Analysis Report
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