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.
Horizon Bancorp in Focus
Based in Michigan City, Horizon Bancorp (HBNC) is in the Finance sector, and so far this year, shares have seen a price change of 0.09%. The bank holding company is currently shelling out a dividend of $0.1 per share, with a dividend yield of 2.16%. This compares to the Banks - Northeast industry's yield of 1.61% and the S&P 500's yield of 1.89%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.40 is up 25% from last year. In the past five-year period, Horizon Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 14.80%. 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. Horizon Bancorp's current payout ratio is 33%. This means it paid out 33% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for HBNC for this fiscal year. The Zacks Consensus Estimate for 2018 is $1.47 per share, which represents a year-over-year growth rate of 44.12%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, HBNC 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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Horizon Bancorp (IN) (HBNC) : Free Stock Analysis Report
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