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Are You Looking for a High-Growth Dividend Stock? Banco Itau (ITUB) Could Be a Great Choice

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Zacks Equity Research
·2 min read
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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.

Banco Itau in Focus

Headquartered in Sao Paulo, Banco Itau (ITUB) is a Finance stock that has seen a price change of -14.29% so far this year. Currently paying a dividend of $0.03 per share, the company has a dividend yield of 2.89%. In comparison, the Banks - Foreign industry's yield is 1.85%, while the S&P 500's yield is 1.47%.

In terms of dividend growth, the company's current annualized dividend of $0.15 is up 4.9% from last year. Over the last 5 years, Banco Itau has increased its dividend 2 times on a year-over-year basis for an average annual increase of 14.85%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Banco Itau's payout ratio is 7%, which means it paid out 7% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, ITUB expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $0.47 per share, representing a year-over-year earnings growth rate of 17.50%.

Bottom Line

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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that ITUB is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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Zacks Investment Research