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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.
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 Federal in Focus
Based in Seattle, Washington Federal (WAFD) is in the Finance sector, and so far this year, shares have seen a price change of 29.22%. Currently paying a dividend of $0.23 per share, the company has a dividend yield of 2.77%. In comparison, the Banks - West industry's yield is 1.9%, while the S&P 500's yield is 1.26%.
In terms of dividend growth, the company's current annualized dividend of $0.92 is up 5.7% from last year. In the past five-year period, Washington Federal has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.71%. 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. Washington Federal's current payout ratio is 46%. This means it paid out 46% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, WAFD expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.10 per share, representing a year-over-year earnings growth rate of 5%.
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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that WAFD is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Washington Federal, Inc. (WAFD) : Free Stock Analysis Report
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