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Is CVB Financial (CVBF) a Good Pick for Income Investors?

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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.

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.

CVB Financial in Focus

Based in Ontario, CVB Financial (CVBF - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 0.51%. The bank holding company is paying out a dividend of $0.14 per share at the moment, with a dividend yield of 2.36% compared to the Banks - West industry's yield of 1.46% and the S&P 500's yield of 1.8%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.56 is up 7.7% from last year. Over the last 5 years, CVB Financial has increased its dividend 3 times on a year-over-year basis for an average annual increase of 7.87%. 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. CVB Financial's current payout ratio is 47%, meaning it paid out 47% of its trailing 12-month EPS as dividend.

CVBF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $1.30 per share, which represents a year-over-year growth rate of 21.50%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, CVBF 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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