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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Based in Pine Bluff, Simmons First National (SFNC) is in the Finance sector, and so far this year, shares have seen a price change of -10.05%. The bank holding company is currently shelling out a dividend of $0.21 per share, with a dividend yield of 4.26%. This compares to the Banks - Southeast industry's yield of 2.34% and the S&P 500's yield of 1.51%.
Looking at dividend growth, the company's current annualized dividend of $0.85 is up 1.2% from last year. Over the last 5 years, Simmons First National has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.01%. 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. Simmons First National's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
SFNC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $1.66 per share, representing a year-over-year earnings growth rate of 17.73%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. Income investors have to be mindful 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 SFNC 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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Simmons First National Corporation (SFNC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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