Investar (ISTR) Could Be a Great Choice
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Headquartered in Baton Rouge, Investar (ISTR) is a Finance stock that has seen a price change of -12.3% so far this year. Currently paying a dividend of $0.1 per share, the company has a dividend yield of 2.18%. In comparison, the Banks - Southeast industry's yield is 2.4%, while the S&P 500's yield is 1.56%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.42 is up 2.4% from last year. In the past five-year period, Investar has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.44%. 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. Investar's current payout ratio is 20%. This means it paid out 20% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ISTR expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $1.95 per share, which represents a year-over-year growth rate of 3.17%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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, ISTR 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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