Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Northrim BanCorp in Focus
Headquartered in Anchorage, Northrim BanCorp (NRIM) is a Finance stock that has seen a price change of 19.33% so far this year. The holding company for Northrim Bank is currently shelling out a dividend of $0.64 per share, with a dividend yield of 2.75%. This compares to the Banks - West industry's yield of 3.2% and the S&P 500's yield of 1.6%.
In terms of 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. Right now, Northrim's payout ratio is 34%, which means it paid out 34% of its trailing 12-month EPS as dividend.
NRIM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $9.66 per share, representing a year-over-year earnings growth rate of 45.92%.
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.
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 have to be mindful 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 NRIM is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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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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