Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Middlefield Banc in Focus
Based in Middlefiled, Middlefield Banc (MBCN) is in the Finance sector, and so far this year, shares have seen a price change of 4.46%. The company is currently shelling out a dividend of $0.28 per share, with a dividend yield of 2.22%. This compares to the Banks – Northeast industry's yield of 1.49% and the S&P 500's yield of 1.78%.
In terms of dividend growth, the company's current annualized dividend of $1.12 is up 3.7% from last year. In the past five-year period, Middlefield Banc has increased its dividend 2 times on a year-over-year basis for an average annual increase of 1.25%. 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. Middlefield Banc's current payout ratio is 35%, meaning it paid out 35% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, MBCN expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $3.70 per share, with earnings expected to increase 13.15% from the year ago period.
Bottom Line
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.
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 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 MBCN is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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