Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Associated Banc-Corp in Focus
Associated Banc-Corp (ASB - Free Report) is headquartered in Green Bay, and is in the Finance sector. The stock has seen a price change of 16.93% since the start of the year. The bank holding company is paying out a dividend of $0.17 per share at the moment, with a dividend yield of 2.94% compared to the Banks - Midwest industry's yield of 2.26% and the S&P 500's yield of 1.93%.
In terms of dividend growth, the company's current annualized dividend of $0.68 is up 9.7% from last year. Associated Banc-Corp has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 13.13%. 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. Associated Banc-Corp's current payout ratio is 34%. This means it paid out 34% of its trailing 12-month EPS as dividend.
ASB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.07 per share, with earnings expected to increase 1.79% from the year ago period.
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.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, ASB 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).