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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Central Valley Community Bancorp in Focus
Headquartered in Fresno, Central Valley Community Bancorp (CVCY) is a Finance stock that has seen a price change of 6.09% so far this year. Currently paying a dividend of $0.1 per share, the company has a dividend yield of 2%. In comparison, the Banks - West industry's yield is 1.89%, while the S&P 500's yield is 1.9%.
In terms of dividend growth, the company's current annualized dividend of $0.40 is up 29% from last year. In the past five-year period, Central Valley Community Bancorp has increased its dividend 3 times on a year-over-year basis for an average annual increase of 11.53%. 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. Right now, Central Valley Community Bancorp's payout ratio is 26%, which means it paid out 26% of its trailing 12-month EPS as dividend.
CVCY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $1.57 per share, which represents a year-over-year growth rate of 1.95%.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, CVCY 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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