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 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
Based in Clearfield, CNB Financial (CCNE) is in the Finance sector, and so far this year, shares have seen a price change of 1.85%. The bank holding company is paying out a dividend of $0.17 per share at the moment, with a dividend yield of 2.59% compared to the Banks - Northeast industry's yield of 2.16% and the S&P 500's yield of 1.37%.
In terms of 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 0.92%. 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 22%, which means it paid out 22% of its trailing 12-month EPS as dividend.
CCNE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $3.18 per share, representing a year-over-year earnings growth rate of 0.63%.
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. With that in mind, CCNE 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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