Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.
Fulton Financial in Focus
Fulton Financial (FULT) is headquartered in Lancaster, and is in the Finance sector. The stock has seen a price change of -1.4% since the start of the year. The financial holding company is paying out a dividend of $0.12 per share at the moment, with a dividend yield of 2.72% compared to the Banks - Northeast industry's yield of 1.55% and the S&P 500's yield of 1.78%.
Looking at dividend growth, the company's current annualized dividend of $0.48 is up 2.1% from last year. In the past five-year period, Fulton Financial has increased its dividend 4 times on a year-over-year basis for an average annual increase of 9.92%. 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. Fulton Financial's current payout ratio is 46%, meaning it paid out 46% of its trailing 12-month EPS as dividend.
FULT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $1.15 per share, representing a year-over-year earnings growth rate of 7.48%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. 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 FULT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
We are reissuing this article to correct a mistake. The original article should no longer be relied upon.
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