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Why Westamerica (WABC) is a Top Dividend Stock for Your Portfolio

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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.

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 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 2.18% 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 2.85% compared to the Banks - West industry's yield of 2.5% and the S&P 500's yield of 1.5%.

In terms of dividend growth, the company's current annualized dividend of $1.68 is up 1.8% from last year. In the past five-year period, Westamerica has increased its dividend 3 times on a year-over-year basis for an average annual increase of 1.26%. 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. Right now, Westamerica's payout ratio is 51%, which means it paid out 51% of its trailing 12-month EPS as dividend.

WABC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $3.55 per share, with earnings expected to increase 10.25% from the year ago period.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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