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.
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.
SB Financial Group, Inc. In Focus
Headquartered in Defiance, SB Financial Group, Inc. (SBFG) is a Finance stock that has seen a price change of -7.6% so far this year. The company is currently shelling out a dividend of $0.15 per share, with a dividend yield of 3.11%. This compares to the Banks - Northeast industry's yield of 2.89% and the S&P 500's yield of 1.56%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.60 is up 7.1% from last year. SB Financial Group, Inc. has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.97%. 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. SB Financial Group's current payout ratio is 32%, meaning it paid out 32% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SBFG for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.03 per share, which represents a year-over-year growth rate of 18.71%.
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.
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 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 SBFG 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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SB Financial Group, Inc. (SBFG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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