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Westamerica (WABC) is a Top Dividend Stock Right Now: Should You Buy?

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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. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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.

Westamerica in Focus

Westamerica (WABC - Free Report) is headquartered in San Rafael, and is in the Finance sector. The stock has seen a price change of 0.07% since the start of the year. Currently paying a dividend of $0.42 per share, the company has a dividend yield of 2.91%. In comparison, the Banks - West industry's yield is 2.6%, while the S&P 500's yield is 1.56%.

In terms of dividend growth, the company's current annualized dividend of $1.68 is up 1.8% from last year. In the past five-year period, Westamerica has increased its dividend 3 times on a year-over-year basis for an average annual increase of 1.26%. 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. Westamerica's current payout ratio is 51%. This means it paid out 51% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, WABC expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.55 per share, representing a year-over-year earnings growth rate of 10.25%.

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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, WABC 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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