Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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.
Bank of Marin in Focus
Based in Novato, Bank of Marin (BMRC) is in the Finance sector, and so far this year, shares have seen a price change of -15.74%. The bank holding company is currently shelling out a dividend of $0.25 per share, with a dividend yield of 3.19%. This compares to the Banks - West industry's yield of 2.69% and the S&P 500's yield of 1.73%.
In terms of dividend growth, the company's current annualized dividend of $1 is up 6.4% from last year. In the past five-year period, Bank of Marin has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.11%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Bank of Marin's current payout ratio is 36%, meaning it paid out 36% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BMRC for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.90 per share, with earnings expected to increase 9.85% 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 BMRC 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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