Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Camden National in Focus
Headquartered in Camden, Camden National (CAC) is a Finance stock that has seen a price change of 8.7% so far this year. The bank is currently shelling out a dividend of $0.3 per share, with a dividend yield of 3.07%. This compares to the Banks - Northeast industry's yield of 1.75% and the S&P 500's yield of 1.99%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.20 is up 9.1% from last year. Camden National has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 10.12%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Camden National's payout ratio is 35%, which means it paid out 35% of its trailing 12-month EPS as dividend.
CAC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.55 per share, representing a year-over-year earnings growth rate of 4.72%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. 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 CAC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Camden National Corporation (CAC) : Free Stock Analysis Report
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