Why First Business Financial Services (FBIZ) is a Top Dividend Stock for Your Portfolio
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.
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.
First Business Financial Services in Focus
Based in Madison, First Business Financial Services (FBIZ) is in the Finance sector, and so far this year, shares have seen a price change of 4.86%. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 2.38%. In comparison, the Banks – Midwest industry’s yield is 3.04%, while the S&P 500’s yield is 1.51%.
In terms of dividend growth, the company’s current annualized dividend of $1 is up 9.9% from last year. In the past five-year period, First Business Financial Services has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.17%. 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. Right now, First Business Financial Services’s payout ratio is 22%, which means it paid out 22% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FBIZ for this fiscal year. The Zacks Consensus Estimate for 2024 is $4.70 per share, representing a year-over-year earnings growth rate of 8.55%.
Bottom Line
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.
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, FBIZ 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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