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.
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 Birmingham, ServisFirst Bancshares (SFBS) is a Finance stock that has seen a price change of 5.35% so far this year. The holding company for ServisFirst Bank is currently shelling out a dividend of $0.38 per share, with a dividend yield of 2.01%. This compares to the Financial - Savings and Loan industry's yield of 2.41% and the S&P 500's yield of 1.43%.
Looking at dividend growth, the company's current annualized dividend of $1.52 is up 13.4% from last year. Over the last 5 years, ServisFirst Bancshares has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.72%. 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. ServisFirst's current payout ratio is 27%, meaning it paid out 27% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SFBS for this fiscal year. The Zacks Consensus Estimate for 2026 is $6.40 per share, which represents a year-over-year growth rate of 21.90%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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, SFBS 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).
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
ServisFirst Bancshares, Inc. (SFBS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).