Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Community Trust Bancorp in Focus
Based in Pikeville, Community Trust Bancorp (CTBI) is in the Finance sector, and so far this year, shares have seen a price change of 3.74%. The bank holding company for Community Trust Bank is paying out a dividend of $0.46 per share at the moment, with a dividend yield of 4.04% compared to the Banks - Southeast industry's yield of 2.5% and the S&P 500's yield of 1.64%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.84 is up 2.2% from last year. In the past five-year period, Community Trust Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.09%. 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, Community Trust Bancorp's payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.
CTBI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $4.38 per share, representing a year-over-year earnings growth rate of 0.46%.
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. It's important to keep in mind that not all companies provide 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 CTBI is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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