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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Farmers & Merchants Bancorp Inc. In Focus
Headquartered in Archbold, Farmers & Merchants Bancorp Inc. (FMAO) is a Finance stock that has seen a price change of 0.82% so far this year. The company is currently shelling out a dividend of $0.19 per share, with a dividend yield of 2.3%. This compares to the Banks - Northeast industry's yield of 2.21% and the S&P 500's yield of 1.41%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.76 is up 7% from last year. In the past five-year period, Farmers & Merchants Bancorp Inc. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.24%. 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. Farmers & Merchants Bancorp Inc.'s current payout ratio is 35%, meaning it paid out 35% of its trailing 12-month EPS as dividend.
FMAO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $2.32 per share, which represents a year-over-year growth rate of 1.75%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 must be conscious 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 FMAO is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Farmers & Merchants Bancorp Inc. (FMAO) : Free Stock Analysis Report
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