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 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.
People's United in Focus
Based in Bridgeport, People's United (PBCT) is in the Finance sector, and so far this year, shares have seen a price change of 21.48%. The holding company for People's United Bank is currently shelling out a dividend of $0.17 per share, with a dividend yield of 3.99%. This compares to the Financial - Savings and Loan industry's yield of 2.31% and the S&P 500's yield of 1.93%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.70 is up 0.4% from last year. Over the last 5 years, People's United has increased its dividend 5 times on a year-over-year basis for an average annual increase of 1.50%. 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. Right now, People's United's payout ratio is 53%, which means it paid out 53% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PBCT expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $1.40 per share, representing a year-over-year earnings growth rate of 6.87%.
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.
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. 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, PBCT 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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People's United Financial, Inc. (PBCT) : Free Stock Analysis Report
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