All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 Pikeville, Community Trust Bancorp (CTBI) is a Finance stock that has seen a price change of 9.26% so far this year. The bank holding company for Community Trust Bank is paying out a dividend of $0.53 per share at the moment, with a dividend yield of 3.43% compared to the Banks - Southeast industry's yield of 2.03% and the S&P 500's yield of 1.37%.
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 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CTBI expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $5.79 per share, with earnings expected to increase 6.63% 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. But, not every company offers 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 must be conscious 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).