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 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.
Heritage Commerce in Focus
Heritage Commerce (HTBK) is headquartered in San Jose, and is in the Finance sector. The stock has seen a price change of 6.44% since the start of the year. The holding company for Heritage Bank of Commerce is currently shelling out a dividend of $0.12 per share, with a dividend yield of 3.98%. This compares to the Banks - West industry's yield of 1.97% and the S&P 500's yield of 1.97%.
Looking at dividend growth, the company's current annualized dividend of $0.48 is up 9.1% from last year. Over the last 5 years, Heritage Commerce has increased its dividend 5 times on a year-over-year basis for an average annual increase of 21.82%. 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. Heritage Commerce's current payout ratio is 43%. This means it paid out 43% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HTBK expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $1.22 per share, representing a year-over-year earnings growth rate of 15.09%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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 HTBK 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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Heritage Commerce Corp (HTBK) : Free Stock Analysis Report
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