All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.
Provident Financial in Focus
Headquartered in Jersey City, Provident Financial (PFS) is a Finance stock that has seen a price change of 0.37% so far this year. The holding company for The Provident Bank is currently shelling out a dividend of $0.24 per share, with a dividend yield of 3.95%. This compares to the Financial - Savings and Loan industry's yield of 2.58% and the S&P 500's yield of 1.59%.
In terms of dividend growth, the company's current annualized dividend of $0.96 is up 3.2% from last year. In the past five-year period, Provident Financial has increased its dividend 3 times on a year-over-year basis for an average annual increase of 3.97%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Provident Financial's current payout ratio is 46%. This means it paid out 46% of its trailing 12-month EPS as dividend.
PFS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $2.27 per share, with earnings expected to increase 3.65% from the year ago period.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PFS presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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Provident Financial Services, Inc (PFS) : Free Stock Analysis Report
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