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Why West Bancorp (WTBA) is a Top Dividend Stock for Your Portfolio

Zacks Equity Research
·3 min read

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.

West Bancorp in Focus

Headquartered in West Des Moines, West Bancorp (WTBA) is a Finance stock that has seen a price change of -37.57% so far this year. The holding company for West Bank is currently shelling out a dividend of $0.21 per share, with a dividend yield of 5.25%. This compares to the Financial - Savings and Loan industry's yield of 3.04% and the S&P 500's yield of 1.66%.

Looking at dividend growth, the company's current annualized dividend of $0.84 is up 1.2% from last year. Over the last 5 years, West Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 6.96%. 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. West Bancorp's current payout ratio is 44%, meaning it paid out 44% of its trailing 12-month EPS as dividend.

WTBA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $2.10 per share, which represents a year-over-year growth rate of 20.69%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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 must be conscious 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 WTBA 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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