Back to top

Image: Bigstock

Are You Looking for a High-Growth Dividend Stock?

Read MoreHide Full Article

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.

Headquartered in Birmingham, Regions Financial (RF - Free Report) is a Finance stock that has seen a price change of 5.72% so far this year. Currently paying a dividend of $0.26 per share, the company has a dividend yield of 3.7%. In comparison, the Banks - Southeast industry's yield is 1.99%, while the S&P 500's yield is 1.44%.

Looking at dividend growth, the company's current annualized dividend of $1.06 is up 2.9% from last year. Over the last 5 years, Regions Financial has increased its dividend 4 times on a year-over-year basis for an average annual increase of 13.34%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Regions Financial's current payout ratio is 44%, meaning it paid out 44% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for RF for this fiscal year. The Zacks Consensus Estimate for 2026 is $2.60 per share, with earnings expected to increase 11.59% from the year ago period.

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.

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, RF presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).

Published in