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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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.
Park National in Focus
Headquartered in Newark, Park National (PRK) is a Finance stock that has seen a price change of 36.2% so far this year. The financial services holding company is currently shelling out a dividend of $3.59 per share, with a dividend yield of 57%. This compares to the Banks - Midwest industry's yield of 30.71% and the S&P 500's yield of 0.96%.
Looking at dividend growth, the company's current annualized dividend of $4.14 is up 0.1% from last year. Over the last 5 years, Park National has increased its dividend 2.10 times on a year-over-year basis for an average annual increase of 1%. 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. Park National's current payout ratio is 2.83%, meaning it paid out 2.83% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PRK for this fiscal year. The Zacks Consensus Estimate for 2018 is $3.84 per share, representing a year-over-year earnings growth rate of 7.25%.
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 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 PRK 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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Park National Corporation (PRK) : Free Stock Analysis Report
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