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Why Banco Bilbao (BBVA) 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 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.

Banco Bilbao in Focus

Headquartered in Madrid, Banco Bilbao (BBVA - Free Report) is a Finance stock that has seen a price change of 15.81% so far this year. The bank is paying out a dividend of $0.34 per share at the moment, with a dividend yield of 6.53% compared to the Banks - Foreign industry's yield of 3.92% and the S&P 500's yield of 1.6%.

Looking at dividend growth, the company's current annualized dividend of $0.69 is up 67.5% from last year. Banco Bilbao has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 9.25%. 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. Banco Bilbao's current payout ratio is 20%, meaning it paid out 20% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BBVA for this fiscal year. The Zacks Consensus Estimate for 2024 is $1.54 per share, representing a year-over-year earnings growth rate of 10%.

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. However, not all companies offer 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 have to be mindful 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 BBVA 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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