gGetting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all of them, is an investor’s dream. However, when you are an income investor, your primary goal is to generate consistent cash flow from each of your liquid investments.
Cash flow can come from interest on bonds, interest from other types of investments and, of course, dividends. A dividend is the distribution of a company’s profits paid to shareholders; it is often viewed by its dividend yield, a measure that measures a dividend as a percentage of the current stock price. Numerous academic studies show that dividends are a large part of long-term returns, and in many cases dividend contributions exceed one-third of total returns.
Salisbury Bancorp in focus
Lakeville-based Salisbury Bancorp (SAL) is a financial stock that has seen a 32.87% price change so far this year. The bank holding company currently pays a dividend of $ 0.3 per share, with a dividend yield of 2.42% compared to the Banks – Northeast industry yield of 2% and the S&P 500 yield of 1.33 %.
When it comes to dividend growth, the company’s current annualized dividend of $ 1.20 is up 3.4% from a year ago. Over the past 5 years, Salisbury Bancorp has increased its dividend 1 time on an annual basis for an average annual increase of 0.79%. Any future dividend growth will depend on both earnings growth and the payout ratio of the company; a payout ratio is the proportion of a company’s annual earnings per share that it pays out as a dividend. Salisbury Bancorp’s current payout ratio is 23%. This means that he paid 23% of his EPS over the last 12 months in the form of a dividend.
SAL also expects an increase in profits during this fiscal year. Zacks’ consensus estimate for 2021 is $ 5.68 per share, which represents a year-over-year growth rate of 35.24%.
Whether it’s dramatically improving earnings from equity investments and reducing overall portfolio risk or offering tax benefits, investors love dividends for a variety of reasons. It is important to keep in mind that not all companies provide quarterly payment.
High-growth companies or tech start-ups, for example, rarely pay their shareholders a dividend, while larger, more established companies with safer earnings are often seen as the best dividend options. Income investors should be aware that high yielding stocks tend to struggle during times of rising interest rates. With that in mind, SAL is a compelling investment opportunity. Not only is this a big dividend game, the stock currently sits at Zacks rank of 3 (Hold).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.