Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Sandy Spring Bancorp in Focus
Headquartered in Olney, Sandy Spring Bancorp (SASR) is a Finance stock that has seen a price change of 6.64% so far this year. The holding company for Sandy Spring Bank is currently shelling out a dividend of $0.3 per share, with a dividend yield of 3.59%. This compares to the Banks - Northeast industry's yield of 1.88% and the S&P 500's yield of 1.9%.
Looking at dividend growth, the company's current annualized dividend of $1.20 is up 9.1% from last year. Sandy Spring Bancorp has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.41%. 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. Sandy Spring Bancorp's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
SASR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.24 per share, which represents a year-over-year growth rate of 13.29%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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 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 SASR 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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Sandy Spring Bancorp, Inc. (SASR) : Free Stock Analysis Report
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