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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.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Peoples Bancorp in Focus
Headquartered in Marietta, Peoples Bancorp (PEBO) is a Finance stock that has seen a price change of 24.95% so far this year. Currently paying a dividend of $0.35 per share, the company has a dividend yield of 4.14%. In comparison, the Banks - Midwest industry's yield is 2.38%, while the S&P 500's yield is 1.26%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.40 is up 2.2% from last year. Over the last 5 years, Peoples Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 19.74%. 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. Peoples Bancorp's current payout ratio is 48%. This means it paid out 48% of its trailing 12-month EPS as dividend.
PEBO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $2.10 per share, which represents a year-over-year growth rate of 7.69%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that PEBO is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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