All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
M&T Bank in Focus
Based in Buffalo, M&T Bank (MTB) is in the Finance sector, and so far this year, shares have seen a price change of 18.05%. The bank holding company is currently shelling out a dividend of $1 per share, with a dividend yield of 2.37%. This compares to the Banks - Major Regional industry's yield of 2.84% and the S&P 500's yield of 1.87%.
Looking at dividend growth, the company's current annualized dividend of $4 is up 12.7% from last year. M&T Bank has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 6.95%. 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. M&T Bank's current payout ratio is 29%, meaning it paid out 29% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, MTB expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $14.61 per share, with earnings expected to increase 13.61% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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, MTB 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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M&T Bank Corporation (MTB) : Free Stock Analysis Report
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