Why Bank OZK (OZK) is a Top Dividend Stock for Your Portfolio
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 -10.81% since the start of the year. The bank is currently shelling out a dividend of $0.32 per share, with a dividend yield of 3.08%. This compares to the Banks - Northeast industry's yield of 2.49% and the S&P 500's yield of 1.72%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.28 is up 13% from last year. In the past five-year period, Bank OZK has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.39%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Bank OZK's current payout ratio is 29%. This means it paid out 29% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for OZK for this fiscal year. The Zacks Consensus Estimate for 2022 is $4.49 per share, representing a year-over-year earnings growth rate of 0.45%.
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. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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 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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