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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Washington Trust Bancorp in Focus
Headquartered in Westerly, Washington Trust Bancorp (WASH) is a Finance stock that has seen a price change of 9.83% so far this year. The holding company for The Washington Trust Co. Is currently shelling out a dividend of $0.47 per share, with a dividend yield of 3.6%. This compares to the Banks - Northeast industry's yield of 1.89% and the S&P 500's yield of 1.93%.
Looking at dividend growth, the company's current annualized dividend of $1.88 is up 6.8% from last year. Over the last 5 years, Washington Trust Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.92%. 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 Trust's payout ratio is 47%, which means it paid out 47% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, WASH expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $4.15 per share, which represents a year-over-year growth rate of 5.60%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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. 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, WASH 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 Trust Bancorp, Inc. (WASH) : Free Stock Analysis Report
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