Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
Regions Financial in Focus
Headquartered in Birmingham, Regions Financial (RF) is a Finance stock that has seen a price change of -4.49% so far this year. The holding company for Regions Bank is currently shelling out a dividend of $0.16 per share, with a dividend yield of 3.78%. This compares to the Banks - Southeast industry's yield of 1.85% and the S&P 500's yield of 1.73%.
Looking at dividend growth, the company's current annualized dividend of $0.62 is up 5.1% from last year. Over the last 5 years, Regions Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 28.24%. 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, Regions Financial's payout ratio is 41%, which means it paid out 41% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for RF for this fiscal year. The Zacks Consensus Estimate for 2020 is $1.61 per share, representing a year-over-year earnings growth rate of 3.87%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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, RF 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Regions Financial Corporation (RF) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research