Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Home BancShares (HOMB) is headquartered in Conway, and is in the Finance sector. The stock has seen a price change of 1.06% since the start of the year. The bank holding company is paying out a dividend of $0.20 per share at the moment, with a dividend yield of 2.8% compared 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 $0.80 is up 6.7% from last year. Over the last 5 years, Home BancShares has increased its dividend 4 times on a year-over-year basis for an average annual increase of 9.28%. 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. Home BancShares's current payout ratio is 37%, meaning it paid out 37% of its trailing 12-month EPS as dividend.
HOMB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $2.34 per share, with earnings expected to increase 16.42% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. That said, they can take comfort from the fact that HOMB is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Home BancShares, Inc. (HOMB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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