Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Zions in Focus
Based in Salt Lake City, Zions (ZION) is in the Finance sector, and so far this year, shares have seen a price change of 13.72%. Currently paying a dividend of $0.3 per share, the company has a dividend yield of 2.59%. In comparison, the Banks - West industry's yield is 2.03%, while the S&P 500's yield is 1.88%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.20 is up 15.4% from last year. Over the last 5 years, Zions has increased its dividend 4 times on a year-over-year basis for an average annual increase of 61.85%. 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, Zions's payout ratio is 30%, which means it paid out 30% of its trailing 12-month EPS as dividend.
ZION is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $4.49 per share, which represents a year-over-year growth rate of 10.05%.
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, ZION 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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