Why Westamerica (WABC) is a Top Dividend Stock for Your Portfolio

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.

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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Westamerica in Focus

Headquartered in San Rafael, Westamerica (WABC) is a Finance stock that has seen a price change of -5.27% so far this year. The holding company for Westamerica Bank is paying out a dividend of $0.42 per share at the moment, with a dividend yield of 3.07% compared to the Banks - West industry's yield of 2.7% and the S&P 500's yield of 1.69%.

In terms of dividend growth, the company's current annualized dividend of $1.68 is up 1.8% from last year. Over the last 5 years, Westamerica has increased its dividend 3 times on a year-over-year basis for an average annual increase of 1.20%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Westamerica's current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for WABC for this fiscal year. The Zacks Consensus Estimate for 2022 is $3.85 per share, representing a year-over-year earnings growth rate of 19.57%.

Bottom Line

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. 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 WABC is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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