All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
Headquartered in Little Rock, Bank OZK (OZK) is a Finance stock that has seen a price change of 16.26% so far this year. The bank is currently shelling out a dividend of $0.44 per share, with a dividend yield of 3.4%. This compares to the Banks - Northeast industry's yield of 2.67% and the S&P 500's yield of 1.51%.
Looking at dividend growth, the company's current annualized dividend of $1.76 is up 11.4% from last year. Over the last 5 years, Bank OZK has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.02%. 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. Bank OZK's current payout ratio is 28%, meaning it paid out 28% of its trailing 12-month EPS as dividend.
OZK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $6.28 per share, which represents a year-over-year growth rate of 2.28%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, OZK presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Bank OZK (OZK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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