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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. 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.
Farmers & Merchants Bancorp Inc. In Focus
Farmers & Merchants Bancorp Inc. (FMAO) is headquartered in Archbold, and is in the Finance sector. The stock has seen a price change of -4.87% since the start of the year. Currently paying a dividend of $0.17 per share, the company has a dividend yield of 3.11%. In comparison, the Banks - Northeast industry's yield is 1.99%, while the S&P 500's yield is 1.34%.
Looking at dividend growth, the company's current annualized dividend of $0.68 is up 3% from last year. Over the last 5 years, Farmers & Merchants Bancorp Inc. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.47%. 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. Farmers & Merchants Bancorp Inc.'s current payout ratio is 37%, meaning it paid out 37% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FMAO for this fiscal year. The Zacks Consensus Estimate for 2021 is $1.91 per share, which represents a year-over-year growth rate of 13.69%.
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.
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. 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 FMAO 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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Farmers & Merchants Bancorp Inc. (FMAO) : Free Stock Analysis Report
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