Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Provident Financial in Focus
Based in Jersey City, Provident Financial (PFS) is in the Finance sector, and so far this year, shares have seen a price change of 7.29%. The holding company for The Provident Bank is paying out a dividend of $0.43 per share at the moment, with a dividend yield of 3.55% compared to the Financial - Savings and Loan industry's yield of 2.25% and the S&P 500's yield of 1.93%.
In terms of dividend growth, the company's current annualized dividend of $0.92 is up 12.2% from last year. Provident Financial has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 8.32%. 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. Provident Financial's current payout ratio is 46%, meaning it paid out 46% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PFS for this fiscal year. The Zacks Consensus Estimate for 2019 is $1.92 per share, which represents a year-over-year growth rate of 5.49%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PFS presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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Provident Financial Services, Inc (PFS) : Free Stock Analysis Report
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