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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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
BancFirst in Focus
Based in Oklahoma City, BancFirst (BANF) is in the Finance sector, and so far this year, shares have seen a price change of 7.6%. Currently paying a dividend of $0.34 per share, the company has a dividend yield of 2.15%. In comparison, the Banks - Southwest industry's yield is 1.45%, while the S&P 500's yield is 1.42%.
In terms of dividend growth, the company's current annualized dividend of $1.36 is up 3% from last year. BancFirst has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 17.50%. 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. BancFirst's current payout ratio is 45%. This means it paid out 45% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BANF expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $3.66 per share, which represents a year-over-year growth rate of 22%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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. That said, they can take comfort from the fact that BANF is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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BancFirst Corporation (BANF) : Free Stock Analysis Report
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