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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Lakeland Bancorp in Focus
Headquartered in Oak Ridge, Lakeland Bancorp (LBAI) is a Finance stock that has seen a price change of -14.96% so far this year. The bank holding company is paying out a dividend of $0.12 per share at the moment, with a dividend yield of 2.81% compared to the Banks - Northeast industry's yield of 1.63% and the S&P 500's yield of 1.97%.
In terms of dividend growth, the company's current annualized dividend of $0.46 is up 16.5% from last year. In the past five-year period, Lakeland Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.59%. 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. Lakeland Bancorp's current payout ratio is 37%. This means it paid out 37% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, LBAI expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $1.34 per share, with earnings expected to increase 20.72% 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.
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 LBAI 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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Lakeland Bancorp, Inc. (LBAI) : Free Stock Analysis Report
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