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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.
Investors Bancorp in Focus
Headquartered in Short Hills, Investors Bancorp (ISBC) is a Finance stock that has seen a price change of 42.42% so far this year. The holding company for Investors Bank is currently shelling out a dividend of $0.14 per share, with a dividend yield of 3.72%. This compares to the Financial - Savings and Loan industry's yield of 2.27% and the S&P 500's yield of 1.3%.
In terms of dividend growth, the company's current annualized dividend of $0.56 is up 16.7% from last year. In the past five-year period, Investors Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 16.15%. 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. Investors Bancorp's current payout ratio is 52%, meaning it paid out 52% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ISBC for this fiscal year. The Zacks Consensus Estimate for 2021 is $1.24 per share, with earnings expected to increase 31.91% 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. 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, ISBC 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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Investors Bancorp, Inc. (ISBC) : Free Stock Analysis Report
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