Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Northrim BanCorp in Focus
Based in Anchorage, Northrim BanCorp (NRIM) is in the Finance sector, and so far this year, shares have seen a price change of 7.74%. The holding company for Northrim Bank is paying out a dividend of $0.64 per share at the moment, with a dividend yield of 3.05% compared to the Banks - West industry's yield of 3.13% and the S&P 500's yield of 1.59%.
Looking at dividend growth, the company's current annualized dividend of $2.56 is up 4.1% from last year. Northrim BanCorp has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 17.16%. 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. Northrim's current payout ratio is 34%, meaning it paid out 34% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, NRIM expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $8.05 per share, with earnings expected to increase 21.60% from the year ago period.
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. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, NRIM 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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Northrim BanCorp Inc (NRIM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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