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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Westamerica in Focus
Headquartered in San Rafael, Westamerica (WABC) is a Finance stock that has seen a price change of -15.61% so far this year. The holding company for Westamerica Bank is currently shelling out a dividend of $0.41 per share, with a dividend yield of 2.87%. This compares to the Banks - West industry's yield of 2.34% and the S&P 500's yield of 2.08%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.64 is up 0.6% from last year. Westamerica has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 1.54%. 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. Westamerica's current payout ratio is 55%. This means it paid out 55% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for WABC for this fiscal year. The Zacks Consensus Estimate for 2020 is $3 per share, which represents a year-over-year growth rate of 0.67%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. With that in mind, WABC 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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Westamerica Bancorporation (WABC) : Free Stock Analysis Report
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