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Are You Looking for a High-Growth Dividend Stock?
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Washington Federal in Focus
Headquartered in Seattle, Washington Federal (WAFD - Free Report) is a Finance stock that has seen a price change of 8.35% so far this year. The holding company for Washington Federal Savings Bank is paying out a dividend of $0.24 per share at the moment, with a dividend yield of 2.64% compared to the Banks - West industry's yield of 2.55% and the S&P 500's yield of 1.61%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.96 is up 1.1% 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 7.60%. 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 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for WAFD for this fiscal year. The Zacks Consensus Estimate for 2023 is $4.25 per share, which represents a year-over-year growth rate of 25.37%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).