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 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.
Community Trust Bancorp in Focus
Community Trust Bancorp (CTBI) is headquartered in Pikeville, and is in the Finance sector. The stock has seen a price change of -1.17% since the start of the year. Currently paying a dividend of $0.36 per share, the company has a dividend yield of 3.09%. In comparison, the Banks - Southeast industry's yield is 1.26%, while the S&P 500's yield is 1.8%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.44 is up 10.8% from last year. Community Trust Bancorp has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 3.11%. 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. Community Trust Bancorp's current payout ratio is 41%, meaning 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 2018 is $3.22 per share, representing a year-over-year earnings growth rate of 15%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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 CTBI 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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Community Trust Bancorp, Inc. (CTBI) : Free Stock Analysis Report
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