Why Unity Bancorp (UNTY) is a Top Dividend Stock for Your Portfolio
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
Unity Bancorp in Focus
Headquartered in Clinton, Unity Bancorp (UNTY) is a Finance stock that has seen a price change of -12.29% so far this year. The bank holding company is paying out a dividend of $0.12 per share at the moment, with a dividend yield of 2% compared to the Banks - Northeast industry's yield of 3.2% and the S&P 500's yield of 1.67%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.48 is up 11.6% from last year. In the past five-year period, Unity Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 12.22%. 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. Right now, Unity Bancorp's payout ratio is 13%, which means it paid out 13% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, UNTY expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $3.64 per share, with earnings expected to increase 1.39% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. 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, UNTY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Unity Bancorp, Inc. (UNTY) : Free Stock Analysis Report
