All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
Headquartered in Mattoon, First Mid Bancshares (FMBH) is a Finance stock that has seen a price change of 9.03% so far this year. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 2.35%. In comparison, the Banks - Northeast industry's yield is 2.37%, while the S&P 500's yield is 1.47%.
Looking at dividend growth, the company's current annualized dividend of $1.00 is up 2% from last year. Over the last 5 years, First Mid Bancshares has increased its dividend 4 times on a year-over-year basis for an average annual increase of 3.67%. 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. First Mid Bancshares's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FMBH for this fiscal year. The Zacks Consensus Estimate for 2026 is $4.49 per share, with earnings expected to increase 12.81% from the year ago period.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers its 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. With that in mind, FMBH is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of #3 (Hold).
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First Mid Bancshares, Inc. (FMBH): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).