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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 for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Bar Harbor Bankshares in Focus
Headquartered in Bar Harbor, Bar Harbor Bankshares (BHB) is a Finance stock that has seen a price change of 12.97% so far this year. The bank is paying out a dividend of $0.24 per share at the moment, with a dividend yield of 3.76% compared to the Banks - Northeast industry's yield of 2.15% and the S&P 500's yield of 1.42%.
In terms of dividend growth, the company's 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 5.47%. 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. Right now, Bar Harbor's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BHB expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.58 per share, representing a year-over-year earnings growth rate of 12.66%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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