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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. However, 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
First Guaranty Bancshares in Focus
Based in Hammond, First Guaranty Bancshares (FGBI) is in the Finance sector, and so far this year, shares have seen a price change of 31.26%. The bank holding company is currently shelling out a dividend of $0.16 per share, with a dividend yield of 2.39%. This compares to the Banks - Southeast industry's yield of 2.13% and the S&P 500's yield of 1.5%.
Looking at dividend growth, the company's current annualized dividend of $0.64 is up 7.4% from last year. Over the last 5 years, First Guaranty Bancshares has increased its dividend 2 times on a year-over-year basis for an average annual increase of 2.09%. 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. First Guaranty Bancshares's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FGBI for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.59 per share, with earnings expected to increase 7.02% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 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 FGBI is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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First Guaranty Bancshares, Inc. (FGBI) : Free Stock Analysis Report
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