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Is First American Financial (FAF) a Great Dividend Play?
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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
First American Financial in Focus
Headquartered in Santa Ana, First American Financial (FAF - Free Report) is a Finance stock that has seen a price change of -0.95% so far this year. The financial services company is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 2.74% compared to the Insurance - Property and Casualty industry's yield of 1.35% and the S&P 500's yield of 1.81%.
In terms of dividend growth, the company's current annualized dividend of $1.52 is up 5.6% from last year. Over the last 5 years, First American Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 25.52%. 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, First American Financial's payout ratio is 37%, which means it paid out 37% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FAF for this fiscal year. The Zacks Consensus Estimate for 2018 is $4.52 per share, with earnings expected to increase 64.36% 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. That said, they can take comfort from the fact that FAF 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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Is First American Financial (FAF) a Great Dividend Play?
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
First American Financial in Focus
Headquartered in Santa Ana, First American Financial (FAF - Free Report) is a Finance stock that has seen a price change of -0.95% so far this year. The financial services company is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 2.74% compared to the Insurance - Property and Casualty industry's yield of 1.35% and the S&P 500's yield of 1.81%.
In terms of dividend growth, the company's current annualized dividend of $1.52 is up 5.6% from last year. Over the last 5 years, First American Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 25.52%. 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, First American Financial's payout ratio is 37%, which means it paid out 37% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FAF for this fiscal year. The Zacks Consensus Estimate for 2018 is $4.52 per share, with earnings expected to increase 64.36% 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. That said, they can take comfort from the fact that FAF is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).