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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Northwest Bancshares in Focus
Northwest Bancshares (NWBI) is headquartered in Warren, and is in the Finance sector. The stock has seen a price change of 9.62% since the start of the year. The holding company for Northwest Savings Bank is paying out a dividend of $0.17 per share at the moment, with a dividend yield of 3.71% compared to the Financial - Savings and Loan industry's yield of 1.75% and the S&P 500's yield of 1.79%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.68 is up 6.3% from last year. In the past five-year period, Northwest Bancshares has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.43%. 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. Right now, Northwest Bancshares's payout ratio is 72%, which means it paid out 72% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for NWBI for this fiscal year. The Zacks Consensus Estimate for 2018 is $1.02 per share, representing a year-over-year earnings growth rate of 21.43%.
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.
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 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 NWBI 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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Northwest Bancshares, Inc. (NWBI) : Free Stock Analysis Report
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