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 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.
Bankinter in Focus
Based in Madrid, Bankinter (BKNIY - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -14.39%. The financial holding company is paying out a dividend of $0.06 per share at the moment, with a dividend yield of 2.89% compared to the Banks - Foreign industry's yield of 3.16% and the S&P 500's yield of 1.91%.
Looking at dividend growth, the company's current annualized dividend of $0.24 is up 3.9% from last year. In the past five-year period, Bankinter has increased its dividend 5 times on a year-over-year basis for an average annual increase of 23.51%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Bankinter's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.
BKNIY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $0.66 per share, representing a year-over-year earnings growth rate of 6.45%.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, BKNIY 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).