All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 30.25% since the start of the year. Currently paying a dividend of $0.28 per share, the company has a dividend yield of 2.81%. In comparison, the Banks - Northeast industry's yield is 2%, while the S&P 500's yield is 1.39%.
Looking at dividend growth, the company's current annualized dividend of $1.12 is up 5.7% from last year. Bryn Mawr Bank has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.66%. 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. Bryn Mawr Bank's current payout ratio is 32%, meaning it paid out 32% of its trailing 12-month EPS as dividend.
BMTC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $2.76 per share, which represents a year-over-year growth rate of 68.29%.
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.
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. With that in mind, BMTC 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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