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 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.
PNC Financial Services in Focus
PNC Financial Services (PNC - Free Report) is headquartered in Pittsburgh, and is in the Finance sector. The stock has seen a price change of 13.69% since the start of the year. Currently paying a dividend of $1.15 per share, the company has a dividend yield of 3.46%. In comparison, the Banks - Major Regional industry's yield is 3.08%, while the S&P 500's yield is 1.99%.
In terms of dividend growth, the company's current annualized dividend of $4.60 is up 35.3% from last year. Over the last 5 years, PNC Financial Services has increased its dividend 4 times on a year-over-year basis for an average annual increase of 18.08%. 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. PNC Financial Services's current payout ratio is 34%. This means it paid out 34% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PNC for this fiscal year. The Zacks Consensus Estimate for 2019 is $11.29 per share, which represents a year-over-year growth rate of 5.42%.
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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PNC 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).