Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 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
Based in Buffalo, M&T Bank Corporation (MTB) is in the Finance sector, and so far this year, shares have seen a price change of 13.17%. The company is paying out a dividend of $1.2 per share at the moment, with a dividend yield of 2.76% compared to the Banks - Major Regional industry's yield of 3.47% and the S&P 500's yield of 1.63%.
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 4 times on a year-over-year basis for an average annual increase of 9.92%. 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. M&T Bank Corporation's current payout ratio is 37%. This means 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, with earnings expected to increase 10.22% from the year ago period.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that MTB is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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M&T Bank Corporation (MTB) : Free Stock Analysis Report
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