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Washington Federal (WAFD) 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 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 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

Washington Federal (WAFD - Free Report) is headquartered in Seattle, and is in the Finance sector. The stock has seen a price change of -4.58% since the start of the year. The holding company for Washington Federal Savings Bank is currently shelling out a dividend of $0.24 per share, with a dividend yield of 3.01%. This compares to the Banks - West industry's yield of 2.79% and the S&P 500's yield of 1.58%.

In terms of dividend growth, the company's current annualized dividend of $0.96 is up 5.5% from last year. Washington Federal has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 10.71%. 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 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, WAFD expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.06 per share, representing a year-over-year earnings growth rate of 28.03%.

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.

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 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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