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.
American National Bankshares in Focus
Headquartered in Danville, American National Bankshares (AMNB) is a Finance stock that has seen a price change of 4.44% so far this year. The bank holding company is currently shelling out a dividend of $0.25 per share, with a dividend yield of 2.5%. This compares to the Banks - Southeast industry's yield of 1.26% and the S&P 500's yield of 1.81%.
In terms of dividend growth, the company's current annualized dividend of $1 is up 3.1% from last year. Over the last 5 years, American National Bankshares has increased its dividend 2 times on a year-over-year basis for an average annual increase of 1.91%. 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. American National Bankshares's current payout ratio is 41%, meaning it paid out 41% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AMNB expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $2.73 per share, with earnings expected to increase 31.88% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. 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, AMNB presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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American National Bankshares, Inc. (AMNB) : Free Stock Analysis Report
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