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BankUnited, Inc. (BKU) is a Top Dividend Stock Right Now: Should You Buy?

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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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

BankUnited, Inc. In Focus

Based in Miami Lakes, BankUnited, Inc. (BKU - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 12.74%. Currently paying a dividend of $0.23 per share, the company has a dividend yield of 2.35%. In comparison, the Banks - Major Regional industry's yield is 2.95%, while the S&P 500's yield is 1.42%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.92 is up 2.2% from last year. In the past five-year period, BankUnited, Inc. has increased its dividend 1 times on a year-over-year basis for an average annual increase of 1.41%. 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. BankUnited, Inc.'s current payout ratio is 45%. This means it paid out 45% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BKU for this fiscal year. The Zacks Consensus Estimate for 2021 is $3.09 per share, with earnings expected to increase 50% from the year ago period.

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. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, BKU 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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