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This is Why Cullen/Frost Bankers (CFR) is a Great Dividend Stock

·2 min read

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.

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.

Cullen/Frost Bankers in Focus

Headquartered in San Antonio, Cullen/Frost Bankers (CFR) is a Finance stock that has seen a price change of -7.07% so far this year. The financial holding company is paying out a dividend of $0.75 per share at the moment, with a dividend yield of 2.56% compared to the Banks - Southwest industry's yield of 1.44% and the S&P 500's yield of 1.74%.

Taking a look at the company's dividend growth, its current annualized dividend of $3 is up 2% from last year. Over the last 5 years, Cullen/Frost Bankers has increased its dividend 4 times on a year-over-year basis for an average annual increase of 5.37%. 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. Cullen/Frost's current payout ratio is 46%, meaning it paid out 46% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for CFR for this fiscal year. The Zacks Consensus Estimate for 2022 is $7.80 per share, with earnings expected to increase 15.38% from the year ago period.

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.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, CFR 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).


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