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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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 7.37% so far this year. The company is currently shelling out a dividend of $1.2 per share, with a dividend yield of 2.91%. This compares to the Banks - Major Regional industry's yield of 3.36% and the S&P 500's yield of 1.68%.
In terms of 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 3 times on a year-over-year basis for an average annual increase of 10.61%. 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, M&T Bank Corporation's payout ratio is 36%, which means 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 $14.11 per share, with earnings expected to increase 2.25% from the year ago period.
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.
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. 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, MTB presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).