Why BancorpSouth (BXS) is a Top Dividend Stock for Your Portfolio
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 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.
BancorpSouth in Focus
Based in Tupelo, BancorpSouth (BXS) is in the Finance sector, and so far this year, shares have seen a price change of 9.07%. Currently paying a dividend of $0.2 per share, the company has a dividend yield of 2.67%. In comparison, the Banks - Southeast industry's yield is 2.02%, while the S&P 500's yield is 1.42%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.80 is up 7.4% from last year. BancorpSouth has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 11.22%. 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. BancorpSouth's current payout ratio is 26%, meaning it paid out 26% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BXS for this fiscal year. The Zacks Consensus Estimate for 2021 is $2.51 per share, representing a year-over-year earnings growth rate of 18.40%.
Bottom Line
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.
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 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 BXS is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
BancorpSouth Bank (BXS): Free Stock Analysis Report
To read this article on Zacks.com click here.
