Why S&T Bancorp (STBA) is a Great Dividend Stock Right Now

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.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

S&T Bancorp in Focus

S&T Bancorp (STBA) is headquartered in Indiana, and is in the Finance sector. The stock has seen a price change of -4.41% since the start of the year. Currently paying a dividend of $0.3 per share, the company has a dividend yield of 3.98%. In comparison, the Banks - Northeast industry's yield is 2.52%, while the S&P 500's yield is 1.64%.

Looking at dividend growth, the company's current annualized dividend of $1.20 is up 6.2% from last year. Over the last 5 years, S&T Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 6.24%. 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. S&T Bancorp's current payout ratio is 43%, meaning it paid out 43% of its trailing 12-month EPS as dividend.

STBA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $3.08 per share, with earnings expected to increase 9.61% 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. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious 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 STBA is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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