Why National Bank Holdings (NBHC) is a Top Dividend Stock for Your Portfolio
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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
National Bank Holdings in Focus
Based in Greenwood Village, National Bank Holdings (NBHC) is in the Finance sector, and so far this year, shares have seen a price change of 5.96%. The holding company for NBH Bank is paying out a dividend of $0.19 per share at the moment, with a dividend yield of 2.32% compared to the Banks - Southeast industry's yield of 1.9% and the S&P 500's yield of 1.99%.
Looking at dividend growth, the company's current annualized dividend of $0.76 is up 40.7% from last year. Over the last 5 years, National Bank Holdings has increased its dividend 3 times on a year-over-year basis for an average annual increase of 36.45%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, National Bank Holdings's payout ratio is 32%, which means it paid out 32% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for NBHC for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.43 per share, which represents a year-over-year growth rate of 12.50%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, NBHC 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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