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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 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 -12.2% since the start of the year. Currently paying a dividend of $0.17 per share, the company has a dividend yield of 2.01%. In comparison, the Banks - Southeast industry's yield is 2.15%, while the S&P 500's yield is 1.44%.
Looking at dividend growth, the company's current annualized dividend of $0.68 is up 17.2% from last year. Over the last 5 years, 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. The First Bancshares's current payout ratio is 21%, meaning it paid out 21% 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 $3.11 per share, representing a year-over-year earnings growth rate of 2.30%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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. That said, they can take comfort from the fact that FBMS is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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The First Bancshares, Inc. (FBMS) : Free Stock Analysis Report
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