Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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.
Headquartered in Mattoon, First Mid Bancshares (FMBH) is a Finance stock that has seen a price change of 26.64% so far this year. The bank holding company is currently shelling out a dividend of $0.26 per share, with a dividend yield of 2.11%. This compares to the Banks - Northeast industry's yield of 2.17% and the S&P 500's yield of 1.43%.
Looking at dividend growth, the company's current annualized dividend of $1.04 is up 6.1% 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 23%, meaning it paid out 23% of its trailing 12-month EPS as dividend.
FMBH is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $4.69 per share, which represents a year-over-year growth rate of 17.84%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FMBH presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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First Mid Bancshares, Inc. (FMBH): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).