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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.
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.
M&T Bank Corporation in Focus
Headquartered in Buffalo, M&T Bank Corporation (MTB) is a Finance stock that has seen a price change of 3.78% so far this year. Currently paying a dividend of $1.2 per share, the company has a dividend yield of 3.01%. In comparison, the Banks - Major Regional industry's yield is 3.41%, while the S&P 500's yield is 1.76%.
In terms of dividend growth, the company's current annualized dividend of $4.80 is up 6.7% from last year. M&T Bank Corporation has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 10.61%. 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. M&T Bank Corporation's current payout ratio is 36%, meaning it paid out 36% of its trailing 12-month EPS as dividend.
MTB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $14.63 per share, representing a year-over-year earnings growth rate of 6.01%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, MTB presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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M&T Bank Corporation (MTB) : Free Stock Analysis Report
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