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.
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.
The First Bancshares in Focus
Headquartered in Hattiesburg, The First Bancshares (FBMS) is a Finance stock that has seen a price change of -24.52% so far this year. Currently paying a dividend of $0.18 per share, the company has a dividend yield of 2.47%. In comparison, the Banks - Southeast industry's yield is 2.19%, while the S&P 500's yield is 1.68%.
In terms of dividend growth, the company's current annualized dividend of $0.72 is up 24.1% from last year. In the past five-year period, The First Bancshares has increased its dividend 5 times on a year-over-year basis for an average annual increase of 40.45%. 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. Right now, The First Bancshares's payout ratio is 23%, which means it paid out 23% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FBMS expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.16 per share, representing a year-over-year earnings growth rate of 3.95%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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. That said, they can take comfort from the fact that FBMS 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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The First Bancshares, Inc. (FBMS) : Free Stock Analysis Report
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