Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Lakeland Bancorp in Focus
Based in Oak Ridge, Lakeland Bancorp (LBAI) is in the Finance sector, and so far this year, shares have seen a price change of 7.76%. Currently paying a dividend of $0.12 per share, the company has a dividend yield of 2.88%. In comparison, the Banks - Northeast industry's yield is 1.72%, while the S&P 500's yield is 1.89%.
Looking at dividend growth, the company's current annualized dividend of $0.46 is up 3.4% from last year. Lakeland Bancorp has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 10.60%. 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, Lakeland Bancorp's payout ratio is 34%, which means it paid out 34% of its trailing 12-month EPS as dividend.
LBAI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $1.37 per share, representing a year-over-year earnings growth rate of 2.24%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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 LBAI 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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Lakeland Bancorp, Inc. (LBAI) : Free Stock Analysis Report
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