Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Sierra Bancorp in Focus
Headquartered in Porterville, Sierra Bancorp (BSRR) is a Finance stock that has seen a price change of 6.74% so far this year. Currently paying a dividend of $0.18 per share, the company has a dividend yield of 2.81%. In comparison, the Banks - West industry's yield is 1.89%, while the S&P 500's yield is 1.89%.
Looking at dividend growth, the company's current annualized dividend of $0.72 is up 12.5% from last year. Over the last 5 years, Sierra Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 16.29%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Sierra Bancorp's current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
BSRR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.21 per share, representing a year-over-year earnings growth rate of 15.10%.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that BSRR is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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