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.
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.
Headquartered in Elmira, Chemung Financial (CHMG) is a Finance stock that has seen a price change of 6.08% so far this year. The financial holding company is currently shelling out a dividend of $0.32 per share, with a dividend yield of 2.47%. This compares to the Banks - Southeast industry's yield of 2.34% and the S&P 500's yield of 1.55%.
Looking at dividend growth, the company's current annualized dividend of $1.28 is up 3.2% from last year. Over the last 5 years, Chemung Financial has increased its dividend 2 times on a year-over-year basis for an average annual increase of 3.09%. 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. Chemung Financial's current payout ratio is 27%, meaning it paid out 27% of its trailing 12-month EPS as dividend.
CHMG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $5.86 per share, representing a year-over-year earnings growth rate of 18.15%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CHMG is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Chemung Financial Corp (CHMG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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