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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Washington Federal in Focus
Headquartered in Seattle, Washington Federal (WAFD) is a Finance stock that has seen a price change of 37.02% 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 2.61% compared to the Banks - West industry's yield of 2.12% and the S&P 500's yield of 1.32%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.92 is up 1.1% from last year. In the past five-year period, Washington Federal has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.99%. 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. Washington Federal's current payout ratio is 38%. This means it paid out 38% 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 $2.83 per share, which represents a year-over-year growth rate of 18.41%.
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 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 WAFD is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Washington Federal, Inc. (WAFD) : Free Stock Analysis Report
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