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 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.
United Bankshares in Focus
Headquartered in Charleston, United Bankshares (UBSI) is a Finance stock that has seen a price change of 13.09% so far this year. Currently paying a dividend of $0.34 per share, the company has a dividend yield of 3.46%. In comparison, the Banks - Southeast industry's yield is 1.15%, while the S&P 500's yield is 1.79%.
In terms of dividend growth, the company's current annualized dividend of $1.36 is up 2.3% from last year. United Bankshares has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 1.57%. 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. United Bankshares's current payout ratio is 59%, meaning it paid out 59% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, UBSI expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $2.50 per share, representing a year-over-year earnings growth rate of 31.58%.
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.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that UBSI is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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United Bankshares, Inc. (UBSI) : Free Stock Analysis Report
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