Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
BancFirst in Focus
BancFirst (BANF) is headquartered in Oklahoma City, and is in the Finance sector. The stock has seen a price change of 14.83% since the start of the year. The Oklahoma financial services holding company is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 2.09% compared to the Banks - Southwest industry's yield of 1.18% and the S&P 500's yield of 1.89%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.20 is up 17.6% from last year. Over the last 5 years, BancFirst has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.34%. 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. Right now, BancFirst's payout ratio is 31%, which means it paid out 31% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BANF expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.85 per share, representing a year-over-year earnings growth rate of 0.79%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. That said, they can take comfort from the fact that BANF 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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