We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is First American Financial (FAF) a Great Dividend Play?
Read MoreHide Full Article
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
First American Financial in Focus
Headquartered in Santa Ana, First American Financial (FAF - Free Report) is a Finance stock that has seen a price change of -3.93% so far this year. The financial services company is paying out a dividend of $0.42 per share at the moment, with a dividend yield of 3.12% compared to the Insurance - Property and Casualty industry's yield of 1.31% and the S&P 500's yield of 1.81%.
In terms of dividend growth, the company's current annualized dividend of $1.68 is up 16.7% from last year. First American Financial has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 25.52%. 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. First American Financial's current payout ratio is 37%. This means it paid out 37% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FAF for this fiscal year. The Zacks Consensus Estimate for 2018 is $4.55 per share, with earnings expected to increase 65.45% from the year ago period.
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. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, FAF 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).
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is First American Financial (FAF) a Great Dividend Play?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
First American Financial in Focus
Headquartered in Santa Ana, First American Financial (FAF - Free Report) is a Finance stock that has seen a price change of -3.93% so far this year. The financial services company is paying out a dividend of $0.42 per share at the moment, with a dividend yield of 3.12% compared to the Insurance - Property and Casualty industry's yield of 1.31% and the S&P 500's yield of 1.81%.
In terms of dividend growth, the company's current annualized dividend of $1.68 is up 16.7% from last year. First American Financial has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 25.52%. 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. First American Financial's current payout ratio is 37%. This means it paid out 37% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FAF for this fiscal year. The Zacks Consensus Estimate for 2018 is $4.55 per share, with earnings expected to increase 65.45% from the year ago period.
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. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, FAF 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).