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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Headquartered in Los Angeles, Preferred Bank (PFBC) is a Finance stock that has seen a price change of -2.35% so far this year. The independent commercial bank is paying out a dividend of $0.80 per share at the moment, with a dividend yield of 3.47% compared to the Banks - West industry's yield of 2.76% and the S&P 500's yield of 1.35%.
Looking at dividend growth, the company's current annualized dividend of $3.20 is up 6.7% from last year. Over the last 5 years, Preferred Bank has increased its dividend 5 times on a year-over-year basis for an average annual increase of 23.36%. 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. Preferred Bank's current payout ratio is 30%, meaning it paid out 30% of its trailing 12-month EPS as dividend.
PFBC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $10.55 per share, with earnings expected to increase 1.34% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. That said, they can take comfort from the fact that PFBC is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Preferred Bank (PFBC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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