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Why The First Bancshares (FBMS) is a Great Dividend Stock Right Now

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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 for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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.

The First Bancshares in Focus

Headquartered in Hattiesburg, The First Bancshares (FBMS) is a Finance stock that has seen a price change of -13.72% so far this year. The bank holding company is paying out a dividend of $0.17 per share at the moment, with a dividend yield of 2.04% compared to the Banks - Southeast industry's yield of 2.05% and the S&P 500's yield of 1.46%.

Looking at dividend growth, the company's current annualized dividend of $0.68 is up 17.2% from last year. The First Bancshares has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 40.58%. 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. The First Bancshares's current payout ratio is 21%, meaning it paid out 21% 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 $3.11 per share, which represents a year-over-year growth rate of 2.30%.

Bottom Line

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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