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Why Bar Harbor Bankshares (BHB) is a Great Dividend Stock Right Now

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 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

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 6.01%. Currently paying a dividend of $0.24 per share, the company has a dividend yield of 3.13%. In comparison, the Banks - Northeast industry's yield is 2.12%, while the S&P 500's yield is 1.36%.

Looking at dividend growth, the company's current annualized dividend of $0.96 is up 2.1% 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 5.89%. 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 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 2022 is $2.92 per share, which represents a year-over-year growth rate of 7.35%.

Bottom Line

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.

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. 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 BHB 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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