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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.
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.
Bryn Mawr Bank in Focus
Headquartered in Bryn Mawr, Bryn Mawr Bank (BMTC) is a Finance stock that has seen a price change of 31.66% so far this year. Currently paying a dividend of $0.28 per share, the company has a dividend yield of 2.78%. In comparison, the Banks - Northeast industry's yield is 1.98%, while the S&P 500's yield is 1.36%.
In terms of dividend growth, the company's current annualized dividend of $1.12 is up 5.7% from last year. Over the last 5 years, Bryn Mawr Bank has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.66%. 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. Bryn Mawr Bank's current payout ratio is 32%, meaning it paid out 32% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BMTC expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.76 per share, which represents a year-over-year growth rate of 68.29%.
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.
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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BMTC 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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Bryn Mawr Bank Corporation (BMTC) : Free Stock Analysis Report
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