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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 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
Community Trust Bancorp (CTBI) is headquartered in Pikeville, and is in the Finance sector. The stock has seen a price change of 5.93% since the start of the year. Currently paying a dividend of $0.36 per share, the company has a dividend yield of 3.43%. In comparison, the Banks - Southeast industry's yield is 1.72%, while the S&P 500's yield is 1.94%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.44 is up 4.3% 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 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. Community Trust Bancorp's current payout ratio is 42%. This means it paid out 42% of its trailing 12-month EPS as dividend.
CTBI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.55 per share, with earnings expected to increase 5.97% 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. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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