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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
The PNC Financial Services Group, Inc in Focus
Headquartered in Pittsburgh, The PNC Financial Services Group, Inc (PNC) is a Finance stock that has seen a price change of 8.16% so far this year. The company is currently shelling out a dividend of $1.25 per share, with a dividend yield of 2.31%. This compares to the Banks - Major Regional industry's yield of 2.39% and the S&P 500's yield of 1.33%.
Looking at dividend growth, the company's current annualized dividend of $5 is up 4.2% from last year. In the past five-year period, The PNC Financial Services Group, Inc has increased its dividend 4 times on a year-over-year basis for an average annual increase of 17.33%. 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. The PNC Financial Services Group, Inc's current payout ratio is 32%, meaning it paid out 32% of its trailing 12-month EPS as dividend.
PNC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $14.25 per share, which represents a year-over-year growth rate of 0.49%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. 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 PNC 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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The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
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