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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
First Mid Bancshares (FMBH) is headquartered in Mattoon, and is in the Finance sector. The stock has seen a price change of 12.65% since the start of the year. The bank holding company is currently shelling out a dividend of $0.25 per share, with a dividend yield of 2.28%. This compares to the Banks - Northeast industry's yield of 2.3% and the S&P 500's yield of 1.41%.
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 24%, meaning it paid out 24% 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 $4.58 per share, representing a year-over-year earnings growth rate of 15.08%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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. 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 FMBH is not only an attractive dividend play, but is also a compelling investment opportunity with a 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).