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BankUnited, Inc. (BKU) Could Be a Great Choice

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

BankUnited, Inc. In Focus

Headquartered in Miami Lakes, BankUnited, Inc. (BKU - Free Report) is a Finance stock that has seen a price change of 12.09% so far this year. Currently paying a dividend of $0.29 per share, the company has a dividend yield of 3.19%. In comparison, the Banks - Major Regional industry's yield is 3.53%, while the S&P 500's yield is 1.58%.

In terms of dividend growth, the company's current annualized dividend of $1.16 is up 9.4% from last year. BankUnited, Inc. has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 6.21%. 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. Right now, BankUnited's payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, BKU expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $2.87 per share, which represents a year-over-year growth rate of 1.41%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. 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, BKU 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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