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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Synovus Financial in Focus
Synovus Financial (SNV - Free Report) is headquartered in Columbus, and is in the Finance sector. The stock has seen a price change of 11.85% since the start of the year. The holding company for Synovus Bank is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 3.35% compared to the Banks - Southeast industry's yield of 1.75% and the S&P 500's yield of 1.9%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.20 is up 20% from last year. In the past five-year period, Synovus Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 31.88%. 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. Synovus's current payout ratio is 27%. This means it paid out 27% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SNV for this fiscal year. The Zacks Consensus Estimate for 2019 is $3.91 per share, which represents a year-over-year growth rate of 7.42%.
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.
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. 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).