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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Sandy Spring Bancorp in Focus
Sandy Spring Bancorp (SASR) is headquartered in Olney, and is in the Finance sector. The stock has seen a price change of 7.75% since the start of the year. The holding company for Sandy Spring Bank is currently shelling out a dividend of $0.3 per share, with a dividend yield of 3.55%. This compares to the Banks - Northeast industry's yield of 1.89% and the S&P 500's yield of 1.94%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.20 is up 9.1% from last year. In the past five-year period, Sandy Spring Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 8.43%. 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, Sandy Spring Bancorp's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, SASR expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.23 per share, which represents a year-over-year growth rate of 12.94%.
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.
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 SASR is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Sandy Spring Bancorp, Inc. (SASR) : Free Stock Analysis Report
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