Is WesBanco (WSBC) a Good Pick for Income Investors?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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 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.
WesBanco in Focus
Headquartered in Wheeling, WesBanco (WSBC) is a Finance stock that has seen a price change of 20.25% so far this year. The holding company for WesBanco Bank is paying out a dividend of $0.29 per share at the moment, with a dividend yield of 2.37% compared to the Banks - Southeast industry's yield of 1.17% and the S&P 500's yield of 1.8%.
Looking at dividend growth, the company's current annualized dividend of $1.16 is up 11.5% from last year. Over the last 5 years, WesBanco has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.86%. 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. WesBanco's current payout ratio is 44%, meaning it paid out 44% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, WSBC expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $3.01 per share, which represents a year-over-year growth rate of 22.86%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. 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 WSBC 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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