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Why BankUnited, Inc. (BKU) 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.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

BankUnited, Inc. In Focus

Headquartered in Miami Lakes, BankUnited, Inc. (BKU - Free Report) is a Finance stock that has seen a price change of -7.8% so far this year. The company is paying out a dividend of $0.27 per share at the moment, with a dividend yield of 3.61% compared to the Banks - Major Regional industry's yield of 3.73% and the S&P 500's yield of 1.6%.

In terms of dividend growth, the company's current annualized dividend of $1.08 is up 1.9% from last year. Over the last 5 years, BankUnited, Inc. has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.67%. 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. BankUnited, Inc.'s current payout ratio is 38%, meaning it paid out 38% of its trailing 12-month EPS as dividend.

BKU is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $2.96 per share, which represents a year-over-year growth rate of 4.59%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. 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 BKU 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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