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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.
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.
Westamerica in Focus
Westamerica (WABC) is headquartered in San Rafael, and is in the Finance sector. The stock has seen a price change of 4.71% since the start of the year. The holding company for Westamerica Bank is paying out a dividend of $0.42 per share at the moment, with a dividend yield of 2.78% compared to the Banks - West industry's yield of 2.79% and the S&P 500's yield of 1.52%.
In terms of dividend growth, the company's current annualized dividend of $1.68 is up 1.8% 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 1.26%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Westamerica's payout ratio is 51%, which means it paid out 51% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, WABC expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.55 per share, with earnings expected to increase 10.25% from the year ago period.
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. With that in mind, WABC presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Westamerica Bancorporation (WABC) : Free Stock Analysis Report
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