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Why BB&T (BBT) is a Top Dividend Stock for Your Portfolio

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.

BB&T in Focus

BB&T is headquartered in Winston-Salem, and is in the Finance sector. The stock has seen a price change of 11.45% since the start of the year. The regional banking company is paying out a dividend of $0.41 per share at the moment, with a dividend yield of 3.36% compared to the Banks - Major Regional industry's yield of 3.17% and the S&P 500's yield of 1.99%.

Looking at dividend growth, the company's current annualized dividend of $1.62 is up 3.8% from last year. BB&T has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 11.92%. 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. BB&T's current payout ratio is 42%. This means it paid out 42% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BBT for this fiscal year. The Zacks Consensus Estimate for 2019 is $4.34 per share, with earnings expected to increase 11% 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BBT 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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