Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Based in Ithaca, Tompkins Financial (TMP) is in the Finance sector, and so far this year, shares have seen a price change of 14.71%. The financial services company is paying out a dividend of $1.34 per share at the moment, with a dividend yield of 3.22% compared to the Banks - Northeast industry's yield of 2.3% and the S&P 500's yield of 1.43%.
Looking at dividend growth, the company's current annualized dividend of $2.68 is up 6.8% from last year. Over the last 5 years, Tompkins Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3.65%. 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. Tompkins's current payout ratio is 40%, meaning it paid out 40% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, TMP expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $7.55 per share, representing a year-over-year earnings growth rate of 19.65%.
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.
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 TMP is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Tompkins Financial Corporation (TMP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).