Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
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 17.69% so far this year. The company is paying out a dividend of $1.2 per share at the moment, with a dividend yield of 2.66% compared to the Banks - Major Regional industry's yield of 3.43% and the S&P 500's yield of 1.69%.
Looking at dividend growth, the company's current annualized dividend of $4.80 is up 6.7% from last year. In the past five-year period, M&T Bank Corporation has increased its dividend 4 times on a year-over-year basis for an average annual increase of 9.92%. 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 37%, meaning it paid out 37% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, MTB expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $15.21 per share, which represents a year-over-year growth rate of 10.22%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, MTB 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
M&T Bank Corporation (MTB) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research