All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
The First Bancshares in Focus
Headquartered in Hattiesburg, The First Bancshares (FBMS) is a Finance stock that has seen a price change of -19.06% so far this year. Currently paying a dividend of $0.19 per share, the company has a dividend yield of 2.43%. In comparison, the Banks - Southeast industry's yield is 2.11%, while the S&P 500's yield is 1.59%.
Looking at dividend growth, the company's current annualized dividend of $0.76 is up 31% from last year. Over the last 5 years, 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. The First Bancshares's current payout ratio is 24%. This means it paid out 24% 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 $3.07 per share, representing a year-over-year earnings growth rate of 0.99%.
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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FBMS is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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The First Bancshares, Inc. (FBMS) : Free Stock Analysis Report
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