Why Northrim BanCorp (NRIM) is a Great Dividend Stock
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
Northrim BanCorp in Focus
Northrim BanCorp (NRIM) is headquartered in Anchorage, and is in the Finance sector. The stock has seen a price change of 25.6% since the start of the year. Currently paying a dividend of $2.45 per share, the company has a dividend yield of 36%. In comparison, the Banks - West industry's yield is 39.71%, while the S&P 500's yield is 0.27%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.78 is up 7.5% from last year. Over the last 5 years, Northrim BanCorp has increased its dividend 14.30 times on a year-over-year basis for an average annual increase of 5%. 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. Northrim's current payout ratio is 30.13%. This means it paid out 30.13% of its trailing 12-month EPS as dividend.
NRIM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $1.08 per share, representing a year-over-year earnings growth rate of 2.90%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. That said, they can take comfort from the fact that NRIM is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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