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

Washington Federal in Focus

Washington Federal (WAFD - Free Report) is headquartered in Seattle, and is in the Finance sector. The stock has seen a price change of 28.67% since the start of the year. Currently paying a dividend of $0.23 per share, the company has a dividend yield of 2.78%. In comparison, the Banks - West industry's yield is 1.78%, while the S&P 500's yield is 1.29%.

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. Washington Federal's current payout ratio is 46%, meaning it paid out 46% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, WAFD expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.10 per share, representing a year-over-year earnings growth rate of 5%.

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. 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 is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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