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Why Washington Federal (WAFD) 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. 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 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

Headquartered in Seattle, Washington Federal (WAFD - Free Report) is a Finance stock that has seen a price change of 12.58% so far this year. Currently paying a dividend of $0.24 per share, the company has a dividend yield of 2.55%. In comparison, the Banks - West industry's yield is 2.67%, while the S&P 500's yield is 1.77%.

Looking at dividend growth, the company's current annualized dividend of $0.96 is up 1.1% from last year. In the past five-year period, Washington Federal has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.94%. 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 28%, which means it paid out 28% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for WAFD for this fiscal year. The Zacks Consensus Estimate for 2022 is $3.58 per share, with earnings expected to increase 5.60% from the year ago period.

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.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, WAFD is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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