All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
First Interstate BancSystem in Focus
First Interstate BancSystem (FIBK) is headquartered in Billings, and is in the Finance sector. The stock has seen a price change of 6.7% since the start of the year. Currently paying a dividend of $0.31 per share, the company has a dividend yield of 3.18%. In comparison, the Banks - Midwest industry's yield is 2.5%, while the S&P 500's yield is 1.88%.
Looking at dividend growth, the company's current annualized dividend of $1.24 is up 10.7% from last year. Over the last 5 years, First Interstate BancSystem has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.24%. 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. First Interstate BancSystem's current payout ratio is 42%, meaning it paid out 42% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FIBK for this fiscal year. The Zacks Consensus Estimate for 2019 is $3.07 per share, representing a year-over-year earnings growth rate of 11.64%.
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.
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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FIBK is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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First Interstate BancSystem, Inc. (FIBK) : Free Stock Analysis Report
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