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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.
SunTrust in Focus
Based in Atlanta, SunTrust (STI - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 6.19%. The holding company for SunTrust Bank is currently shelling out a dividend of $0.5 per share, with a dividend yield of 2.92%. This compares to the Banks - Major Regional industry's yield of 2.23% and the S&P 500's yield of 1.78%.
In terms of dividend growth, the company's current annualized dividend of $2 is up 51.5% from last year. Over the last 5 years, SunTrust has increased its dividend 4 times on a year-over-year basis for an average annual increase of 29.98%. 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, SunTrust's payout ratio is 32%, which means it paid out 32% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, STI expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $5.60 per share, representing a year-over-year earnings growth rate of 38.61%.
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.
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. That said, they can take comfort from the fact that STI is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
We are reissuing this article to correct a mistake. The original article should no longer be relied upon.
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Is SunTrust (STI) a High-Growth Dividend Stock?
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.
SunTrust in Focus
Based in Atlanta, SunTrust (STI - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 6.19%. The holding company for SunTrust Bank is currently shelling out a dividend of $0.5 per share, with a dividend yield of 2.92%. This compares to the Banks - Major Regional industry's yield of 2.23% and the S&P 500's yield of 1.78%.
In terms of dividend growth, the company's current annualized dividend of $2 is up 51.5% from last year. Over the last 5 years, SunTrust has increased its dividend 4 times on a year-over-year basis for an average annual increase of 29.98%. 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, SunTrust's payout ratio is 32%, which means it paid out 32% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, STI expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $5.60 per share, representing a year-over-year earnings growth rate of 38.61%.
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.
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. That said, they can take comfort from the fact that STI is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
We are reissuing this article to correct a mistake. The original article should no longer be relied upon.