All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
WesBanco in Focus
Based in Wheeling, WesBanco (WSBC - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 20.76%. The holding company for WesBanco Bank is currently shelling out a dividend of $0.29 per share, with a dividend yield of 2.36%. This compares to the Banks - Southeast industry's yield of 1.19% and the S&P 500's yield of 1.78%.
In terms of dividend growth, the company's current annualized dividend of $1.16 is up 11.5% from last year. Over the last 5 years, WesBanco has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.86%. 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. WesBanco's current payout ratio is 41%, meaning it paid out 41% of its trailing 12-month EPS as dividend.
WSBC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $3.09 per share, which represents a year-over-year growth rate of 26.12%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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. 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 WSBC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).