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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
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 46.56%. The holding company for People's United Bank is currently shelling out a dividend of $0.18 per share, with a dividend yield of 3.85%. This compares to the Financial - Savings and Loan industry's yield of 2.27% and the S&P 500's yield of 1.3%.
In terms of dividend growth, the company's current annualized dividend of $0.73 is up 1.7% from last year. In the past five-year period, People's United has increased its dividend 5 times on a year-over-year basis for an average annual increase of 1.38%. 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. People's United's current payout ratio is 55%. This means it paid out 55% of its trailing 12-month EPS as dividend.
PBCT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $1.29 per share, which represents a year-over-year growth rate of 1.57%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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Peoples United Financial, Inc. (PBCT) : Free Stock Analysis Report
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