All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Community Bank System in Focus
Based in Dewitt, Community Bank System (CBU) is in the Finance sector, and so far this year, shares have seen a price change of -8.61%. The bank holding company is currently shelling out a dividend of $0.43 per share, with a dividend yield of 2.53%. This compares to the Banks - Northeast industry's yield of 2.41% and the S&P 500's yield of 1.61%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.72 is up 1.2% from last year. Community Bank System has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.64%. 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. Community Bank's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CBU for this fiscal year. The Zacks Consensus Estimate for 2022 is $3.52 per share, which represents a year-over-year growth rate of 0.86%.
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.
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 CBU is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Community Bank System, Inc. (CBU) : Free Stock Analysis Report
To read this article on Zacks.com click here.