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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Independent Bank Group in Focus
Independent Bank Group (IBTX) is headquartered in Mckinney, and is in the Finance sector. The stock has seen a price change of -6.44% since the start of the year. The bank holding company is currently shelling out a dividend of $0.38 per share, with a dividend yield of 2.25%. This compares to the Banks - Southeast industry's yield of 2.18% and the S&P 500's yield of 1.73%.
In terms of dividend growth, the company's current annualized dividend of $1.52 is up 15.2% from last year. In the past five-year period, Independent Bank Group has increased its dividend 4 times on a year-over-year basis for an average annual increase of 34.10%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Independent Bank Group's current payout ratio is 30%, meaning it paid out 30% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for IBTX for this fiscal year. The Zacks Consensus Estimate for 2022 is $5.25 per share, with earnings expected to increase 0.19% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. That said, they can take comfort from the fact that IBTX 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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Independent Bank Group, Inc (IBTX) : Free Stock Analysis Report
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