Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
Huntington Bancshares in Focus
Headquartered in Columbus, Huntington Bancshares (HBAN - Free Report) is a Finance stock that has seen a price change of 10.49% so far this year. The regional bank holding company is currently shelling out a dividend of $0.14 per share, with a dividend yield of 4.25%. This compares to the Banks - Midwest industry's yield of 2.32% and the S&P 500's yield of 1.92%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.56 is up 12% from last year. In the past five-year period, Huntington Bancshares has increased its dividend 5 times on a year-over-year basis for an average annual increase of 24.15%. 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. Huntington Bancshares's current payout ratio is 47%, meaning it paid out 47% of its trailing 12-month EPS as dividend.
HBAN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $1.33 per share, with earnings expected to increase 10.83% from the year ago period.
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. 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, HBAN 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).