All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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 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.
Washington Federal in Focus
Headquartered in Seattle, Washington Federal (WAFD) is a Finance stock that has seen a price change of 26.88% so far this year. The holding company for Washington Federal Savings Bank is paying out a dividend of $0.23 per share at the moment, with a dividend yield of 2.82% compared to the Banks - West industry's yield of 1.89% and the S&P 500's yield of 1.33%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.92 is up 5.7% from last year. Washington Federal has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 12.71%. 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. Right now, Washington Federal's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, WAFD expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.10 per share, which represents a year-over-year growth rate of 5%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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, WAFD 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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Washington Federal, Inc. (WAFD) : Free Stock Analysis Report
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