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Why First United Corporation (FUNC) is a Top Dividend Stock for Your Portfolio

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.

First United Corporation in Focus

Based in Oakland, First United Corporation (FUNC - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 17.65%. The company is paying out a dividend of $0.2 per share at the moment, with a dividend yield of 2.89% compared to the Banks - Northeast industry's yield of 2.78% and the S&P 500's yield of 1.58%.

In terms of dividend growth, the company's current annualized dividend of $0.80 is up 2.6% from last year. Over the last 5 years, First United Corporation has increased its dividend 3 times on a year-over-year basis for an average annual increase of 13.88%. 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. First United's current payout ratio is 28%. This means it paid out 28% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for FUNC for this fiscal year. The Zacks Consensus Estimate for 2024 is $3 per share, with earnings expected to increase 7.14% 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. 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FUNC presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).


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