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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Umpqua Holdings in Focus
Umpqua Holdings (UMPQ) is headquartered in Portland, and is in the Finance sector. The stock has seen a price change of 14.34% since the start of the year. Currently paying a dividend of $0.21 per share, the company has a dividend yield of 4.62%. In comparison, the Banks - West industry's yield is 1.8%, while the S&P 500's yield is 2.01%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.84 is up 2.4% from last year. Umpqua Holdings has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 7.43%. 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. Umpqua's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, UMPQ expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $1.68 per share, with earnings expected to increase 15.07% 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. However, not all companies offer 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, UMPQ 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).