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Why Cullen/Frost Bankers (CFR) is a Great Dividend Stock Right Now

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

Cullen/Frost Bankers in Focus

Cullen/Frost Bankers (CFR - Free Report) is headquartered in San Antonio, and is in the Finance sector. The stock has seen a price change of -5.37% since the start of the year. The financial holding company is currently shelling out a dividend of $0.75 per share, with a dividend yield of 2.51%. This compares to the Banks - Southwest industry's yield of 1.43% and the S&P 500's yield of 1.6%.

In terms of dividend growth, the company's current annualized dividend of $3 is up 2% from last year. Cullen/Frost Bankers has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.93%. 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. Cullen/Frost's current payout ratio is 46%, meaning it paid out 46% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for CFR for this fiscal year. The Zacks Consensus Estimate for 2022 is $7.64 per share, which represents a year-over-year growth rate of 13.02%.

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. But, not every company offers 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 must be conscious 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 CFR is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).


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