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Why Washington Federal (WAFD) is a Top Dividend Stock for Your Portfolio

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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. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Washington Federal in Focus

Based in Seattle, Washington Federal (WAFD - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 28.44%. The holding company for Washington Federal Savings Bank is paying out a dividend of $0.23 per share at the moment, with a dividend yield of 2.78% compared to the Banks - West industry's yield of 1.83% and the S&P 500's yield of 1.28%.

Looking at dividend growth, the company's current annualized dividend of $0.92 is up 5.7% from last year. Over the last 5 years, Washington Federal has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.71%. 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, Washington Federal's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for WAFD for this fiscal year. The Zacks Consensus Estimate for 2021 is $2.10 per share, which represents a year-over-year growth rate of 5%.

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.

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 WAFD 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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