This is Why BancorpSouth (BXS) is a Great Dividend Stock

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.

BancorpSouth in Focus

BancorpSouth (BXS) is headquartered in Tupelo, and is in the Finance sector. The stock has seen a price change of -6.78% since the start of the year. The bank is currently shelling out a dividend of $0.19 per share, with a dividend yield of 2.53%. This compares to the Banks - Southeast industry's yield of 1.9% and the S&P 500's yield of 1.77%.

Looking at dividend growth, the company's current annualized dividend of $0.74 is up 4.2% from last year. BancorpSouth has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 19.70%. 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. BancorpSouth's current payout ratio is 29%, meaning it paid out 29% of its trailing 12-month EPS as dividend.

BXS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $2.42 per share, representing a year-over-year earnings growth rate of 5.22%.

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. It's important to keep in mind that not all companies provide 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. With that in mind, BXS 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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