All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.
Brookline Bancorp in Focus
Based in Boston, Brookline Bancorp (BRKL) is in the Finance sector, and so far this year, shares have seen a price change of 3.4%. The bank holding company is paying out a dividend of $0.1 per share at the moment, with a dividend yield of 2.94% compared to the Financial - Savings and Loan industry's yield of 2.25% and the S&P 500's yield of 1.97%.
Looking at dividend growth, the company's current annualized dividend of $0.42 is up 6.3% from last year. In the past five-year period, Brookline Bancorp has increased its dividend 2 times on a year-over-year basis for an average annual increase of 3.24%. 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. Right now, Brookline's payout ratio is 39%, which means it paid out 39% of its trailing 12-month EPS as dividend.
BRKL is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $1.10 per share, which represents a year-over-year growth rate of 2.80%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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 have to be mindful 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 BRKL is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Brookline Bancorp, Inc. (BRKL) : Free Stock Analysis Report
To read this article on Zacks.com click here.