Why TrustCo Bank (TRST) 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. 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

TrustCo Bank in Focus

Headquartered in Glenville, TrustCo Bank (TRST) is a Finance stock that has seen a price change of -3.69% so far this year. The holding company for Trustco Bank is paying out a dividend of $0.35 per share at the moment, with a dividend yield of 4.36% compared to the Banks - Northeast industry's yield of 2.33% and the S&P 500's yield of 1.52%.

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

TRST is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $3.35 per share, which represents a year-over-year growth rate of 5.02%.

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. However, not all companies offer a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that TRST is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

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