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.
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.
Headquartered in South Bend, 1st Source (SRCE) is a Finance stock that has seen a price change of 12.02% so far this year. The holding company for 1st Source Bank is currently shelling out a dividend of $0.40 per share, with a dividend yield of 2.29%. This compares to the Banks - Midwest industry's yield of 2.57% and the S&P 500's yield of 1.36%.
Looking at dividend growth, the company's current annualized dividend of $1.60 is up 5.3% from last year. Over the last 5 years, 1st Source has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.67%. 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. 1st Source's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
SRCE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $6.69 per share, representing a year-over-year earnings growth rate of 4.37%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that SRCE 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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The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.
One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.
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1st Source Corporation (SRCE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).