Are You Looking for a High-Growth Dividend Stock? Home BancShares (HOMB) Could Be a Great Choice
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.
Home BancShares in Focus
Home BancShares (HOMB) is headquartered in Conway, and is in the Finance sector. The stock has seen a price change of 8.26% since the start of the year. Currently paying a dividend of $0.14 per share, the company has a dividend yield of 2.66%. In comparison, the Banks - Southeast industry's yield is 2.11%, while the S&P 500's yield is 1.42%.
In terms of dividend growth, the company's current annualized dividend of $0.56 is up 5.7% from last year. Over the last 5 years, Home BancShares has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.17%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Home BancShares's current payout ratio is 29%, meaning it paid out 29% of its trailing 12-month EPS as dividend.
HOMB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $1.47 per share, representing a year-over-year earnings growth rate of 13.08%.
Bottom Line
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. 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 HOMB 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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