Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
CNB Financial in Focus
Headquartered in Clearfield, CNB Financial (CCNE) is a Finance stock that has seen a price change of -4.72% so far this year. The bank holding company is paying out a dividend of $0.17 per share at the moment, with a dividend yield of 2.77% compared to the Banks - Northeast industry's yield of 2.49% and the S&P 500's yield of 1.65%.
Looking at dividend growth, the company's current annualized dividend of $0.70 is up 2.2% from last year. Over the last 5 years, CNB Financial has increased its dividend 2 times on a year-over-year basis for an average annual increase of 1.02%. 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, CNB's payout ratio is 21%, which means it paid out 21% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CCNE expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.48 per share, representing a year-over-year earnings growth rate of 10.13%.
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. With that in mind, CCNE 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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