All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
TriCo in Focus
Headquartered in Chico, TriCo (TCBK) is a Finance stock that has seen a price change of 12.4% so far this year. Currently paying a dividend of $0.19 per share, the company has a dividend yield of 2%. In comparison, the Banks - West industry's yield is 2.01%, while the S&P 500's yield is 1.97%.
Looking at dividend growth, the company's current annualized dividend of $0.76 is up 8.6% from last year. In the past five-year period, TriCo has increased its dividend 3 times on a year-over-year basis for an average annual increase of 12.35%. 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. TriCo's current payout ratio is 28%. This means it paid out 28% of its trailing 12-month EPS as dividend.
TCBK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.01 per share, with earnings expected to increase 11.90% from the year ago period.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, TCBK is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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