Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
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 -4.13% since the start of the year. The company is paying out a dividend of $0.17 per share at the moment, with a dividend yield of 3.08% compared to the Banks - Northeast industry's yield of 2.01% and the S&P 500's yield of 1.29%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.68 is up 3% from last year. Farmers & Merchants Bancorp Inc. has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.71%. Future dividend growth will depend on earnings growth as well as 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 39%. This means it paid out 39% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FMAO expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $1.90 per share, representing a year-over-year earnings growth rate of 13.10%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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 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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