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.
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
Headquartered in Jersey City, Provident Financial (PFS) is a Finance stock that has seen a price change of -16.31% so far this year. The holding company for The Provident Bank is currently shelling out a dividend of $0.24 per share, with a dividend yield of 4.74%. This compares to the Financial - Savings and Loan industry's yield of 2.69% and the S&P 500's yield of 1.85%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.96 is up 3.2% from last year. In the past five-year period, Provident Financial has increased its dividend 3 times on a year-over-year basis for an average annual increase of 3.97%. 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. Provident Financial's current payout ratio is 46%. This means 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 2022 is $2.27 per share, representing a year-over-year earnings growth rate of 3.65%.
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.
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. Income investors must be conscious 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 PFS is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Provident Financial Services, Inc (PFS) : Free Stock Analysis Report
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