All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
1st Source in Focus
1st Source (SRCE) is headquartered in South Bend, and is in the Finance sector. The stock has seen a price change of 4.56% since the start of the year. Currently paying a dividend of $0.38 per share, the company has a dividend yield of 2.49%. In comparison, the Banks - Midwest industry's yield is 3.08%, while the S&P 500's yield is 1.59%.
In terms of dividend growth, the company's current annualized dividend of $1.52 is up 8.6% from last year. 1st Source has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 5.43%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. 1st Source's current payout ratio is 25%. This means it paid out 25% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SRCE for this fiscal year. The Zacks Consensus Estimate for 2025 is $5.93 per share, which represents a year-over-year growth rate of 8.01%.
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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, SRCE 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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1st Source Corporation (SRCE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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