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.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Huntington Bancshares in Focus
Headquartered in Columbus, Huntington Bancshares (HBAN) is a Finance stock that has seen a price change of -20.36% so far this year. The regional bank holding company is currently shelling out a dividend of $0.16 per share, with a dividend yield of 5.05%. This compares to the Banks - Midwest industry's yield of 2.66% and the S&P 500's yield of 1.74%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.62 is up 2.5% from last year. Over the last 5 years, Huntington Bancshares has increased its dividend 4 times on a year-over-year basis for an average annual increase of 11.96%. 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. Huntington Bancshares's current payout ratio is 45%. This 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 $1.42 per share, which represents a year-over-year growth rate of 31.48%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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. 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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Huntington Bancshares Incorporated (HBAN) : Free Stock Analysis Report
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