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.
S&T Bancorp in Focus
Headquartered in Indiana, S&T Bancorp (STBA) is a Finance stock that has seen a price change of -2.41% so far this year. The holding company for S&T Bank is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 3.9% compared to the Banks - Northeast industry's yield of 2.44% and the S&P 500's yield of 1.62%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.20 is up 6.2% from last year. S&T Bancorp has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 6.24%. 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. S&T Bancorp's current payout ratio is 43%, meaning it paid out 43% of its trailing 12-month EPS as dividend.
STBA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $3.06 per share, which represents a year-over-year growth rate of 8.90%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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 have to be mindful 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 STBA is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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S&T Bancorp, Inc. (STBA) : Free Stock Analysis Report
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