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Why Bank OZK (OZK) is a Great Dividend Stock Right Now

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 OZK in Focus

Bank OZK (OZK) is headquartered in Little Rock, and is in the Finance sector. The stock has seen a price change of 8.99% since the start of the year. The bank is currently shelling out a dividend of $0.28 per share, with a dividend yield of 3.26%. This compares to the Banks - Northeast industry's yield of 2.14% and the S&P 500's yield of 1.42%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.11 is up 3% from last year. Over the last 5 years, Bank OZK has increased its dividend 5 times on a year-over-year basis for an average annual increase of 14.45%. 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 OZK's current payout ratio is 52%, meaning it paid out 52% of its trailing 12-month EPS as dividend.

OZK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $2.99 per share, representing a year-over-year earnings growth rate of 32.30%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that OZK is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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