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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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Bar Harbor Bankshares in Focus
Based in Bar Harbor, Bar Harbor Bankshares (BHB) is in the Finance sector, and so far this year, shares have seen a price change of 37.45%. The bank is paying out a dividend of $0.24 per share at the moment, with a dividend yield of 3.09% compared to the Banks - Northeast industry's yield of 2.01% and the S&P 500's yield of 1.3%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.96 is up 9.1% from last year. In the past five-year period, Bar Harbor Bankshares has increased its dividend 4 times on a year-over-year basis for an average annual increase of 5.17%. 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. Right now, Bar Harbor's payout ratio is 36%, which means it paid out 36% of its trailing 12-month EPS as dividend.
BHB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $2.56 per share, which represents a year-over-year growth rate of 11.79%.
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.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BHB is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Bar Harbor Bankshares, Inc. (BHB): Free Stock Analysis Report
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