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.
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.
Park National in Focus
Headquartered in Newark, Park National (PRK) is a Finance stock that has seen a price change of 7.52% so far this year. The financial services holding company is currently shelling out a dividend of $1.21 per share, with a dividend yield of 3.43%. This compares to the Banks – Midwest industry's yield of 1.88% and the S&P 500's yield of 1.79%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.84 is up 36.2% from last year. Park National has increased its dividend 1 times on a year-over-year basis over the last 5 years for an average annual increase of 0.12%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Park National's current payout ratio is 61%. This means it paid out 61% of its trailing 12-month EPS as dividend.
PRK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $7 per share, which represents a year-over-year growth rate of 27.97%.
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.
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. 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 PRK 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
Be the first to comment