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.
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.
First Savings Financial in Focus
First Savings Financial (FSFG) is headquartered in Jeffersonville, and is in the Finance sector. The stock has seen a price change of -24.5% since the start of the year. Currently paying a dividend of $0.14 per share, the company has a dividend yield of 3.71%. In comparison, the Financial - Savings and Loan industry's yield is 3.74%, while the S&P 500's yield is 1.7%.
In terms of dividend growth, the company's current annualized dividend of $0.56 is up 1.8% from last year. In the past five-year period, First Savings Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 31.80%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. First Savings Financial's current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
FSFG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $2.15 per share, which represents a year-over-year growth rate of 16.22%.
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 FSFG is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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