Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Provident Financial in Focus
Headquartered in Jersey City, Provident Financial (PFS) is a Finance stock that has seen a price change of 10.4% so far this year. Currently paying a dividend of $0.43 per share, the company has a dividend yield of 3.45%. In comparison, the Financial - Savings and Loan industry's yield is 2.31%, while the S&P 500's yield is 1.96%.
In terms of dividend growth, the company's current annualized dividend of $0.92 is up 12.2% from last year. Over the last 5 years, Provident Financial has increased its dividend 4 times on a year-over-year basis for an average annual increase of 8.32%. 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. Provident Financial's current payout ratio is 46%. This means it paid out 46% of its trailing 12-month EPS as dividend.
PFS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $1.92 per share, representing a year-over-year earnings growth rate of 5.49%.
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.
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. 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 PFS is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
Provident Financial Services, Inc (PFS): Free Stock Analysis Report
Original post