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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Bryn Mawr Bank in Focus
Bryn Mawr Bank (BMTC) is headquartered in Bryn Mawr, and is in the Finance sector. The stock has seen a price change of 16.3% since the start of the year. The bank holding company is currently shelling out a dividend of $2.06 per share, with a dividend yield of 29%. This compares to the Banks - Northeast industry's yield of 29.34% and the S&P 500's yield of 0.25%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.43 is up 5.3% from last year. Bryn Mawr Bank has increased its dividend 4.80 times on a year-over-year basis over the last 5 years for an average annual increase of 5%. 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, Bryn Mawr Bank's payout ratio is 9.84%, which means it paid out 9.84% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BMTC expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $1 per share, representing a year-over-year earnings growth rate of 3.57%.
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, BMTC presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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