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.
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.
Based in Pikeville, Community Trust Bancorp (CTBI) is in the Finance sector, and so far this year, shares have seen a price change of 27.68%. The bank holding company for Community Trust Bank is currently shelling out a dividend of $0.53 per share, with a dividend yield of 2.94%. This compares to the Banks - Southeast industry's yield of 1.95% and the S&P 500's yield of 1.35%.
Looking at dividend growth, the company's current annualized dividend of $2.12 is up 6% from last year. Over the last 5 years, Community Trust Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.32%. 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. Community Trust Bancorp's current payout ratio is 37%, meaning it paid out 37% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CTBI for this fiscal year. The Zacks Consensus Estimate for 2026 is $6.13 per share, with earnings expected to increase 12.89% 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. It's important to keep in mind that not all companies provide 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. With that in mind, CTBI 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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Community Trust Bancorp, Inc. (CTBI): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).