Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
BancFirst in Focus
Headquartered in Oklahoma City, BancFirst (BANF) is a Finance stock that has seen a price change of 8.5% so far this year. The Oklahoma financial services holding company is currently shelling out a dividend of $0.3 per share, with a dividend yield of 2.22%. This compares to the Banks - Southwest industry's yield of 1.15% and the S&P 500's yield of 1.99%.
Looking at dividend growth, the company's 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. BancFirst's current payout ratio is 31%, meaning 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 $3.89 per share, with earnings expected to increase 1.83% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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 BANF 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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