Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
People's United in Focus
Headquartered in Bridgeport, People's United (PBCT) is a Finance stock that has seen a price change of 16.63% so far this year. The holding company for People's United Bank is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 4.22% compared to the Financial - Savings and Loan industry's yield of 2.23% and the S&P 500's yield of 1.88%.
Looking at dividend growth, the company's current annualized dividend of $0.71 is up 1.9% from last year. People's United has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 1.49%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. People's United's current payout ratio is 52%. This means it paid out 52% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PBCT for this fiscal year. The Zacks Consensus Estimate for 2019 is $1.37 per share, which represents a year-over-year growth rate of 4.58%.
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, PBCT presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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People's United Financial, Inc. (PBCT) : Free Stock Analysis Report
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