Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
NBT Bancorp in Focus
NBT Bancorp (NBTB) is headquartered in Norwich, and is in the Finance sector. The stock has seen a price change of -16.75% since the start of the year. Currently paying a dividend of $0.34 per share, the company has a dividend yield of 3.42%. In comparison, the Banks - Northeast industry's yield is 3.2%, while the S&P 500's yield is 1.69%.
In terms of dividend growth, the company's current annualized dividend of $1.36 is up 3% from last year. NBT Bancorp has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 5.73%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, NBT's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.
NBTB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $3.48 per share, which represents a year-over-year growth rate of 18.37%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their 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, NBTB is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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NBT Bancorp Inc. (NBTB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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