Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
Mid Penn Bancorp in Focus
Based in Millersburg, Mid Penn Bancorp (MPB) is in the Finance sector, and so far this year, shares have seen a price change of 4.95%. The company is currently shelling out a dividend of $0.25 per share, with a dividend yield of 2.48%. This compares to the Banks - Northeast industry's yield of 1.73% and the S&P 500's yield of 1.88%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.60 is up 33.3% from last year. Over the last 5 years, Mid Penn Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 10.64%. 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. Mid Penn Bancorp's current payout ratio is 30%. This means it paid out 30% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for MPB for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.15 per share, which represents a year-over-year growth rate of 4.88%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, MPB 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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