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.
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 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
Associated Banc-Corp (ASB) is headquartered in Green Bay, and is in the Finance sector. The stock has seen a price change of 13.19% since the start of the year. The bank holding company is paying out a dividend of $0.17 per share at the moment, with a dividend yield of 3.04% compared to the Banks - Midwest industry's yield of 2.36% and the S&P 500's yield of 1.97%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.68 is up 9.7% from last year. Associated Banc-Corp has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 13.13%. 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%, meaning 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 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.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. 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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