Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Comerica in Focus
Based in Dallas, Comerica (CMA - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 20.54%. The regional bank is paying out a dividend of $0.6 per share at the moment, with a dividend yield of 2.9% compared to the Banks - Major Regional industry's yield of 2.83% and the S&P 500's yield of 1.97%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.40 is up 30.4% from last year. Over the last 5 years, Comerica has increased its dividend 5 times on a year-over-year basis for an average annual increase of 21.11%. 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, Comerica's payout ratio is 33%, which means it paid out 33% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CMA expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $8.19 per share, which represents a year-over-year growth rate of 13.17%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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, CMA 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).