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This is Why KeyCorp (KEY) is a Great Dividend Stock
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
KeyCorp in Focus
KeyCorp (KEY - Free Report) is headquartered in Cleveland, and is in the Finance sector. The stock has seen a price change of -5.57% since the start of the year. Currently paying a dividend of $0.2 per share, the company has a dividend yield of 4.98%. In comparison, the Banks - Major Regional industry's yield is 3.21%, while the S&P 500's yield is 1.64%.
In terms of dividend growth, the company's current annualized dividend of $0.82 is up 3.8% from last year. KeyCorp has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 8.48%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. KeyCorp's current payout ratio is 36%, meaning it paid out 36% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for KEY for this fiscal year. The Zacks Consensus Estimate for 2023 is $2.15 per share, with earnings expected to increase 11.98% from the year ago period.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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, KEY 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).