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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Investors Bancorp in Focus
Based in Short Hills, Investors Bancorp (ISBC) is in the Finance sector, and so far this year, shares have seen a price change of 39.58%. The holding company for Investors Bank is currently shelling out a dividend of $0.14 per share, with a dividend yield of 3.8%. This compares to the Financial - Savings and Loan industry's yield of 2.38% and the S&P 500's yield of 1.27%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.56 is up 16.7% from last year. Investors Bancorp has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 16.15%. 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. Right now, Investors Bancorp's payout ratio is 52%, which means it paid out 52% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ISBC expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $1.19 per share, which represents a year-over-year growth rate of 26.60%.
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.
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 ISBC 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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Investors Bancorp, Inc. (ISBC) : Free Stock Analysis Report
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