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.
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.
Based in Harrisburg, Orrstown Financial Services (ORRF) is in the Finance sector, and so far this year, shares have seen a price change of -3.74%. The holding company for Orrstown Bank is currently shelling out a dividend of $0.27 per share, with a dividend yield of 3.06%. This compares to the Banks - Northeast industry's yield of 2.55% and the S&P 500's yield of 1.5%.
Looking at dividend growth, the company's current annualized dividend of $1.08 is up 25.6% from last year. Over the last 5 years, Orrstown Financial Services has increased its dividend 4 times on a year-over-year basis for an average annual increase of 7.49%. 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. Orrstown's current payout ratio is 26%, meaning it paid out 26% of its trailing 12-month EPS as dividend.
ORRF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $4.18 per share, representing a year-over-year earnings growth rate of 11.17%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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. With that in mind, ORRF 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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Orrstown Financial Services Inc (ORRF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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