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 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 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 -11.75%. The bank holding company is paying out a dividend of $0.44 per share at the moment, with a dividend yield of 2.68% compared to the Banks - Northeast industry's yield of 2.37% and the S&P 500's yield of 1.74%.
Looking at dividend growth, the company's current annualized dividend of $1.76 is up 3.5% from last year. In the past five-year period, Community Bank System has increased its dividend 5 times on a year-over-year basis 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%. This means 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 $3.56 per share, with earnings expected to increase 2.01% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that CBU is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Community Bank System, Inc. (CBU) : Free Stock Analysis Report
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