All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Huntington Bancshares in Focus
Based in Columbus, Huntington Bancshares (HBAN - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 14.77%. The regional bank holding company is paying out a dividend of $0.14 per share at the moment, with a dividend yield of 4.09% compared to the Banks - Midwest industry's yield of 2.35% and the S&P 500's yield of 1.9%.
In terms of dividend growth, the company's current annualized dividend of $0.56 is up 12% from last year. Over the last 5 years, 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. Right now, Huntington Bancshares's payout ratio is 47%, which means it paid out 47% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for HBAN for this fiscal year. The Zacks Consensus Estimate for 2019 is $1.33 per share, with earnings expected to increase 10.83% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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 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).