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 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.
Huntington Bancshares in Focus
Huntington Bancshares (HBAN) is headquartered in Columbus, and is in the Finance sector. The stock has seen a price change of -6.16% since the start of the year. The regional bank holding company is paying out a dividend of $0.16 per share at the moment, with a dividend yield of 4.28% compared to the Banks - Midwest industry's yield of 2.79% and the S&P 500's yield of 1.56%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.62 is up 2.5% from last year. In the past five-year period, Huntington Bancshares has increased its dividend 4 times on a year-over-year basis for an average annual increase of 9.37%. 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. Right now, Huntington Bancshares's payout ratio is 45%, which means it paid out 45% of its trailing 12-month EPS as dividend.
HBAN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $1.46 per share, with earnings expected to increase 35.19% from the year ago period.
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.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HBAN 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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