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 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.
Washington Trust Bancorp in Focus
Washington Trust Bancorp (WASH) is headquartered in Westerly, and is in the Finance sector. The stock has seen a price change of 10.08% since the start of the year. Currently paying a dividend of $0.51 per share, the company has a dividend yield of 3.9%. In comparison, the Banks - Northeast industry's yield is 1.8%, while the S&P 500's yield is 1.86%.
Looking at dividend growth, the company's current annualized dividend of $2.04 is up 15.9% from last year. In the past five-year period, Washington Trust Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.13%. 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. Washington Trust's current payout ratio is 47%. This means it paid out 47% of its trailing 12-month EPS as dividend.
WASH is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $4.15 per share, representing a year-over-year earnings growth rate of 5.60%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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. 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, WASH 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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Washington Trust Bancorp, Inc. (WASH) : Free Stock Analysis Report
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