All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Community Trust Bancorp in Focus
Headquartered in Pikeville, Community Trust Bancorp (CTBI) is a Finance stock that has seen a price change of 6.61% so far this year. The bank holding company for Community Trust Bank is currently shelling out a dividend of $0.36 per share, with a dividend yield of 3.41%. This compares to the Banks - Southeast industry's yield of 1.73% and the S&P 500's yield of 1.88%.
In terms of dividend growth, the company's current annualized dividend of $1.44 is up 4.3% from last year. Over the last 5 years, Community Trust Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.14%. 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, Community Trust Bancorp's payout ratio is 41%, which means it paid out 41% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CTBI for this fiscal year. The Zacks Consensus Estimate for 2019 is $3.51 per share, with earnings expected to increase 4.78% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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, CTBI 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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Community Trust Bancorp, Inc. (CTBI) : Free Stock Analysis Report
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