Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Associated Banc-Corp in Focus
Based in Green Bay, Associated Banc-Corp (ASB) is in the Finance sector, and so far this year, shares have seen a price change of 14.55%. Currently paying a dividend of $0.17 per share, the company has a dividend yield of 3%. In comparison, the Banks - Midwest industry's yield is 2.35%, while the S&P 500's yield is 1.89%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.68 is up 9.7% from last year. In the past five-year period, Associated Banc-Corp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.85%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Associated Banc-Corp's current payout ratio is 34%. This means it paid out 34% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ASB for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.06 per share, representing a year-over-year earnings growth rate of 1.48%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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. With that in mind, ASB 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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