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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Regions Financial in Focus
Based in Birmingham, Regions Financial (RF - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 12.93%. The holding company for Regions Bank is currently shelling out a dividend of $0.16 per share, with a dividend yield of 4.1%. This compares to the Banks - Southeast industry's yield of 1.92% and the S&P 500's yield of 1.93%.
In terms of dividend growth, the company's current annualized dividend of $0.62 is up 34.8% from last year. Over the last 5 years, Regions Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 27.45%. 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. Regions Financial's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, RF expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $1.54 per share, which represents a year-over-year growth rate of 13.24%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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, RF 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).