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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
National Bank Holdings in Focus
Headquartered in Greenwood Village, National Bank Holdings (NBHC) is a Finance stock that has seen a price change of 17.33% so far this year. The holding company for NBH Bank is currently shelling out a dividend of $0.19 per share, with a dividend yield of 2.1%. This compares to the Banks - Southeast industry's yield of 1.8% and the S&P 500's yield of 1.87%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.76 is up 40.7% from last year. Over the last 5 years, National Bank Holdings has increased its dividend 3 times on a year-over-year basis for an average annual increase of 36.45%. 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, National Bank Holdings's payout ratio is 30%, which means it paid out 30% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for NBHC for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.42 per share, representing a year-over-year earnings growth rate of 12.04%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. With that in mind, NBHC 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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National Bank Holdings Corporation (NBHC) : Free Stock Analysis Report
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