Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Hope Bancorp in Focus
Based in Los Angeles, Hope Bancorp (HOPE - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 16.95%. The bank holding company is currently shelling out a dividend of $0.14 per share, with a dividend yield of 4.04%. This compares to the Banks - West industry's yield of 1.8% and the S&P 500's yield of 1.96%.
Looking at dividend growth, the company's current annualized dividend of $0.56 is up 3.7% from last year. Hope Bancorp has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 11.56%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Hope Bancorp's payout ratio is 39%, which means it paid out 39% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for HOPE for this fiscal year. The Zacks Consensus Estimate for 2019 is $1.49 per share, which represents a year-over-year growth rate of 3.47%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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, HOPE presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).