All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
BOK Financial in Focus
Based in Tulsa, BOK Financial (BOKF - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 22.38%. Currently paying a dividend of $0.5 per share, the company has a dividend yield of 2.23%. In comparison, the Banks - Southwest industry's yield is 1.13%, while the S&P 500's yield is 1.93%.
Looking at dividend growth, the company's current annualized dividend of $2 is up 5.3% from last year. BOK Financial has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 3.79%. 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. Right now, BOK Financial's payout ratio is 29%, which means it paid out 29% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BOKF expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $7.41 per share, representing a year-over-year earnings growth rate of 9.22%.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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, BOKF 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).