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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.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Preferred Bank in Focus
Based in Los Angeles, Preferred Bank (PFBC) is in the Finance sector, and so far this year, shares have seen a price change of -1.56%. Currently paying a dividend of $0.43 per share, the company has a dividend yield of 2.43%. In comparison, the Banks - West industry's yield is 2.57%, while the S&P 500's yield is 1.62%.
In terms of dividend growth, the company's current annualized dividend of $1.72 is up 19.4% from last year. In the past five-year period, Preferred Bank has increased its dividend 4 times on a year-over-year basis for an average annual increase of 15.92%. 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. Preferred Bank's current payout ratio is 24%, meaning it paid out 24% of its trailing 12-month EPS as dividend.
PFBC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $7.94 per share, representing a year-over-year earnings growth rate of 23.87%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. 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 PFBC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Preferred Bank (PFBC) : Free Stock Analysis Report
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