All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
Comerica in Focus
Based in Dallas, Comerica (CMA) is in the Finance sector, and so far this year, shares have seen a price change of 4.45%. The regional bank is currently shelling out a dividend of $0.67 per share, with a dividend yield of 3.74%. This compares to the Banks - Major Regional industry's yield of 2.77% and the S&P 500's yield of 1.87%.
In terms of dividend growth, the company's current annualized dividend of $2.68 is up 45.7% from last year. Comerica has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 29.74%. 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. Comerica's current payout ratio is 34%, meaning it paid out 34% of its trailing 12-month EPS as dividend.
CMA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $8.21 per share, which represents a year-over-year growth rate of 14.03%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CMA 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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Comerica Incorporated (CMA) : Free Stock Analysis Report
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