All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
First Financial Northwest in Focus
First Financial Northwest (FFNW) is headquartered in Renton, and is in the Finance sector. The stock has seen a price change of 29.39% since the start of the year. The bank is paying out a dividend of $0.11 per share at the moment, with a dividend yield of 2.98% compared to the Banks - West industry's yield of 1.83% and the S&P 500's yield of 1.29%.
Looking at dividend growth, the company's current annualized dividend of $0.44 is up 10% from last year. Over the last 5 years, First Financial Northwest has increased its dividend 4 times on a year-over-year basis for an average annual increase of 14.05%. 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. First Financial's current payout ratio is 45%, meaning it paid out 45% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FFNW expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $0.98 per share, with earnings expected to increase 11.36% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that FFNW is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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First Financial Northwest, Inc. (FFNW) : Free Stock Analysis Report
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