Are You Looking for a High-Growth Dividend Stock?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
First Financial Bankshares in Focus
First Financial Bankshares (FFIN) is headquartered in Abilene, and is in the Finance sector. The stock has seen a price change of -4.82% since the start of the year. The commercial banker operating mostly in Texas is currently shelling out a dividend of $0.18 per share, with a dividend yield of 2.5%. This compares to the Banks - Southwest industry's yield of 0.73% and the S&P 500's yield of 1.58%.
In terms of dividend growth, the company's current annualized dividend of $0.72 is up 1.4% from last year. First Financial Bankshares has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 10.95%. 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. Right now, First Financial's payout ratio is 51%, which means it paid out 51% of its trailing 12-month EPS as dividend.
FFIN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $1.48 per share, with earnings expected to increase 6.47% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, FFIN is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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