Are You Looking For A High-growth Dividend Stock?

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.

German American Bancorp in Focus

German American Bancorp (GABC) is headquartered in Jasper, and is in the Finance sector. The stock has seen a price change of -2.81% since the start of the year. The financial services holding company is paying out a dividend of $0.29 per share at the moment, with a dividend yield of 2.97% compared to the Banks - Midwest industry's yield of 3.08% and the S&P 500's yield of 1.59%.

In terms of dividend growth, the company's current annualized dividend of $1.16 is up 7.4% from last year. German American Bancorp has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.04%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. German American Bancorp's current payout ratio is 39%. This means it paid out 39% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for GABC for this fiscal year. The Zacks Consensus Estimate for 2025 is $3.35 per share, with earnings expected to increase 18.37% from the year ago period.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, GABC 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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This article originally published on Zacks Investment Research (zacks.com).

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