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First Horizon National (FHN) is a Top Dividend Stock Right Now: Should You Buy?

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.

First Horizon National in Focus

First Horizon National (FHN - Free Report) is headquartered in Memphis, and is in the Finance sector. The stock has seen a price change of 13.07% since the start of the year. Currently paying a dividend of $0.14 per share, the company has a dividend yield of 3.76%. In comparison, the Banks - Southeast industry's yield is 1.77%, while the S&P 500's yield is 1.88%.

In terms of dividend growth, the company's current annualized dividend of $0.56 is up 16.7% from last year. First Horizon National has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 25.06%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, First Horizon's payout ratio is 39%, which means it paid out 39% of its trailing 12-month EPS as dividend.

FHN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $1.47 per share, representing a year-over-year earnings growth rate of 4.26%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FHN 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).


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