Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
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 2.1% since the start of the year. Currently paying a dividend of $2.72 per share, the company has a dividend yield of 46%. In comparison, the Banks - Northeast industry's yield is 7.48%, while the S&P 500's yield is 0.12%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.63 is up 9.9% from last year. In the past five-year period, Fulton Financial has increased its dividend 9.10 times on a year-over-year basis for an average annual increase of 4%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Fulton Financial's current payout ratio is -1.40%, meaning it paid out -1.40% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FULT for this fiscal year. The Zacks Consensus Estimate for 2018 is $0.48 per share, representing a year-over-year earnings growth rate of 1.37%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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 FULT 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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