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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Home BancShares in Focus
Based in Conway, Home BancShares (HOMB) is in the Finance sector, and so far this year, shares have seen a price change of -1.2%. The bank holding company is currently shelling out a dividend of $0.19 per share, with a dividend yield of 2.79%. This compares to the Banks - Southeast industry's yield of 2.38% and the S&P 500's yield of 1.64%.
Looking at dividend growth, the company's current annualized dividend of $0.78 is up 4% 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 9.55%. 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. Right now, Home BancShares's payout ratio is 38%, which means it paid out 38% 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 $2.26 per share, which represents a year-over-year growth rate of 12.44%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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 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
Home BancShares, Inc. (HOMB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
