Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Headquartered in South Bend, 1st Source (SRCE) is a Finance stock that has seen a price change of 5.29% so far this year. Currently paying a dividend of $0.38 per share, the company has a dividend yield of 2.47%. In comparison, the Banks - Midwest industry's yield is 3.2%, while the S&P 500's yield is 1.5%.
Looking at dividend growth, the company's current annualized dividend of $1.52 is up 8.6% from last year. Over the last 5 years, 1st Source has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.67%. 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. 1st Source's current payout ratio is 26%, meaning it paid out 26% of its trailing 12-month EPS as dividend.
SRCE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $6.22 per share, representing a year-over-year earnings growth rate of 13.30%.
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.
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 SRCE is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
1st Source Corporation (SRCE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
