Why Cadence (CADE) is a Great Dividend Stock Right Now

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.

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.

Cadence in Focus

Headquartered in Tupelo, Cadence (CADE) is a Finance stock that has seen a price change of -10.91% so far this year. The bank is currently shelling out a dividend of $0.22 per share, with a dividend yield of 3.32%. This compares to the Banks - Southeast industry's yield of 2.22% and the S&P 500's yield of 1.72%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.88 is up 12.8% from last year. Cadence has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.34%. 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. Cadence's current payout ratio is 33%. This means it paid out 33% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for CADE for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.92 per share, representing a year-over-year earnings growth rate of 1.04%.

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.

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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, CADE 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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