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.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Synovus Financial in Focus
Based in Columbus, Synovus Financial (SNV - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 14.44%. The holding company for Synovus Bank is currently shelling out a dividend of $0.25 per share, with a dividend yield of 3.28%. This compares to the Banks - Southeast industry's yield of 1.67% and the S&P 500's yield of 1.98%.
Looking at dividend growth, the company's current annualized dividend of $1.20 is up 20% from last year. Synovus Financial has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 30.65%. 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. Synovus's current payout ratio is 27%. This means it paid out 27% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, SNV expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.94 per share, which represents a year-over-year growth rate of 8.24%.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, SNV 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).