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Bank of America (BAC) is a Top Dividend Stock Right Now: Should You Buy?
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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.
Bank of America in Focus
Based in Charlotte, Bank of America (BAC - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 15.46%. Currently paying a dividend of $0.15 per share, the company has a dividend yield of 2.11%. In comparison, the Banks - Major Regional industry's yield is 3.17%, while the S&P 500's yield is 2.01%.
In terms of dividend growth, the company's current annualized dividend of $0.60 is up 11.1% from last year. Bank of America has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 55.13%. 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. Bank of America's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BAC expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.77 per share, with earnings expected to increase 6.13% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BAC 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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Bank of America (BAC) is a Top Dividend Stock Right Now: Should You Buy?
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.
Bank of America in Focus
Based in Charlotte, Bank of America (BAC - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 15.46%. Currently paying a dividend of $0.15 per share, the company has a dividend yield of 2.11%. In comparison, the Banks - Major Regional industry's yield is 3.17%, while the S&P 500's yield is 2.01%.
In terms of dividend growth, the company's current annualized dividend of $0.60 is up 11.1% from last year. Bank of America has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 55.13%. 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. Bank of America's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BAC expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.77 per share, with earnings expected to increase 6.13% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BAC 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).