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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Based in Cincinnati, Fifth Third Bancorp (FITB) is in the Finance sector, and so far this year, shares have seen a price change of 4.59%. The company is currently shelling out a dividend of $0.37 per share, with a dividend yield of 3.62%. This compares to the Banks - Major Regional industry's yield of 3.24% and the S&P 500's yield of 1.52%.
Looking at dividend growth, the company's current annualized dividend of $1.60 is up 11.1% from last year. Over the last 5 years, Fifth Third Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 7.84%. 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. Fifth Third Bancorp's current payout ratio is 44%, meaning it paid out 44% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FITB expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $3.51 per share, which represents a year-over-year growth rate of 4.15%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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, FITB 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).
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Fifth Third Bancorp (FITB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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