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Are You Looking for a High-Growth Dividend Stock?

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·2 min read
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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 for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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.

The First Bancshares in Focus

The First Bancshares (FBMS) is headquartered in Hattiesburg, and is in the Finance sector. The stock has seen a price change of -24.91% since the start of the year. The bank holding company is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 2.48% compared to the Banks - Southeast industry's yield of 2.18% and the S&P 500's yield of 1.75%.

In terms of dividend growth, the company's current annualized dividend of $0.72 is up 24.1% from last year. In the past five-year period, The First Bancshares has increased its dividend 5 times on a year-over-year basis for an average annual increase of 40.58%. 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, The First Bancshares's payout ratio is 23%, which means it paid out 23% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, FBMS expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.10 per share, with earnings expected to increase 1.97% from the year ago period.

Bottom Line

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.

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. 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, FBMS 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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Zacks Investment Research