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Why Central Valley Community Bancorp (CVCY) is a Top Dividend Stock for Your Portfolio

Zacks Equity Research

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Central Valley Community Bancorp in Focus

Headquartered in Fresno, Central Valley Community Bancorp (CVCY) is a Finance stock that has seen a price change of 13.78% so far this year. Currently paying a dividend of $0.11 per share, the company has a dividend yield of 2.05%. In comparison, the Banks - West industry's yield is 2.05%, while the S&P 500's yield is 1.91%.

In terms of dividend growth, the company's current annualized dividend of $0.44 is up 41.9% from last year. In the past five-year period, Central Valley Community Bancorp has increased its dividend 3 times on a year-over-year basis for an average annual increase of 11.53%. 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, Central Valley Community Bancorp's payout ratio is 26%, which means it paid out 26% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, CVCY expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $1.57 per share, with earnings expected to increase 1.95% from the year ago period.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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, CVCY 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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