Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
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 8.37%. Currently paying a dividend of $0.13 per share, the company has a dividend yield of 3.12%. In comparison, the Banks - Northeast industry's yield is 1.83%, while the S&P 500's yield is 1.87%.
Looking at dividend growth, the company's current annualized dividend of $0.50 is up 12.4% 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 10.65%. 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.
Earnings growth looks solid for LBAI for this fiscal year. The Zacks Consensus Estimate for 2019 is $1.43 per share, with earnings expected to increase 6.72% 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. However, not all companies offer 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. With that in mind, LBAI 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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Lakeland Bancorp, Inc. (LBAI) : Free Stock Analysis Report
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