Community Bank System (CBU) is a Top Dividend Stock Right Now: Should You Buy?

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.

Community Bank System in Focus

Headquartered in Dewitt, Community Bank System (CBU) is a Finance stock that has seen a price change of -3.06% so far this year. The bank holding company is currently shelling out a dividend of $0.43 per share, with a dividend yield of 2.38%. This compares to the Banks - Northeast industry's yield of 2.35% and the S&P 500's yield of 1.56%.

Looking at dividend growth, the company's current annualized dividend of $1.72 is up 1.2% from last year. In the past five-year period, Community Bank System has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.64%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Community Bank's payout ratio is 51%, which means it paid out 51% of its trailing 12-month EPS as dividend.

CBU is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $3.56 per share, which represents a year-over-year growth rate of 2.01%.

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. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that CBU is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

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