Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor’s dream. But when you’re an income investor, your main goal is to generate consistent cash flow from each of your liquid investments.
While the cash flow can come from interest on bonds or interest from other types of investments, income investors focus on dividends. A dividend is the coveted distribution of a company’s profits paid to shareholders, and investors often perceive it through its dividend yield, a measure that measures the 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.
Bryn Mawr Bank in brief
Bryn Mawr-based Bryn Mawr Bank (BMTC) is in the financials business, and so far this year stocks have seen a 56.24% price change. The bank holding company is currently disbursing a dividend of $ 0.27 per share, with a dividend yield of 2.26%. This compares to the Banks – Northeast industry return of 1.94% and the S&P 500 return of 1.29%.
In terms of dividend growth, the company’s current annualized dividend of $ 1.08 is up 1.9% from last year. Over the past 5 years Bryn Mawr Bank has increased its dividend 5 times on an annual basis for an average annual increase of 7.02%. Going forward, future dividend growth will depend on earnings growth and the payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as a dividend. Bryn Mawr Bank’s current payout ratio is 35%, which means it has paid 35% of its 12-month EPS as a dividend.
BMTC expects its profits to increase this exercise as well. Zacks’ consensus estimate for 2021 is $ 2.76 per share, which represents a year-over-year growth rate of 68.29%.
At the end of the line
Investors love dividends for many reasons; they dramatically improve returns on stock market investments, reduce overall portfolio risk, and provide tax benefits, among other things. It’s important to keep in mind that not all companies offer quarterly payouts.
For example, it is rare for a tech start-up or a large growth company to offer its shareholders a dividend. It’s more common to see larger companies with more established earnings hand out dividends. During times of rising interest rates, income investors should be aware that high yielding stocks tend to struggle. That said, they can take comfort in the fact that BMTC is not only an attractive dividend game, but also a compelling investment opportunity with a Zacks rank of # 2 (Buy).
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