Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.
Zions in Focus
Headquartered in Salt Lake City, Zions (ZION) is a Finance stock that has seen a price change of -3.89% so far this year. The financial holding company is paying out a dividend of $0.34 per share at the moment, with a dividend yield of 2.73% compared to the Banks - West industry's yield of 1.93% and the S&P 500's yield of 1.75%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.36 is up 6.3% from last year. Over the last 5 years, Zions has increased its dividend 5 times on a year-over-year basis for an average annual increase of 62.86%. 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, Zions's payout ratio is 32%, which means it paid out 32% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ZION expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $4.43 per share, which represents a year-over-year growth rate of 2.31%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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, ZION 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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Zions Bancorporation, N.A. (ZION) : Free Stock Analysis Report
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