Are You Looking for a High-Growth Dividend Stock?

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.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

Tompkins Financial in Focus

Headquartered in Ithaca, Tompkins Financial (TMP) is a Finance stock that has seen a price change of -11.38% so far this year. The financial services company is paying out a dividend of $0.62 per share at the moment, with a dividend yield of 4.13% compared to the Banks - Northeast industry's yield of 2.83% and the S&P 500's yield of 1.59%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.48 is up 1.6% from last year. In the past five-year period, Tompkins Financial has increased its dividend 4 times on a year-over-year basis for an average annual increase of 3.89%. 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. Right now, Tompkins's payout ratio is 48%, which means it paid out 48% of its trailing 12-month EPS as dividend.

TMP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $5.58 per share, representing a year-over-year earnings growth rate of 12.27%.

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. However, not all companies offer 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. That said, they can take comfort from the fact that TMP is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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