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TrustCo Bank (TRST) Could Be a Great Choice

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

TrustCo Bank in Focus

Based in Glenville, TrustCo Bank (TRST - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -6.81%. The holding company for Trustco Bank is currently shelling out a dividend of $0.35 per share, with a dividend yield of 4.51%. This compares to the Banks - Northeast industry's yield of 2.5% and the S&P 500's yield of 1.74%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.40 is up 2% from last year. TrustCo Bank has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 1.14%. 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. TrustCo's current payout ratio is 42%. This means it paid out 42% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, TRST expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.35 per share, with earnings expected to increase 5.02% from the year ago period.

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, TRST 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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