All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
United Community Banks (UCB) is headquartered in Greenville, and is in the Finance sector. The stock has seen a price change of -8.76% since the start of the year. The bank holding company is paying out a dividend of $0.25 per share at the moment, with a dividend yield of 3.39% compared to the Banks - Southeast industry's yield of 2.41% and the S&P 500's yield of 1.52%.
Looking at dividend growth, the company's current annualized dividend of $1.00 is up 6.4% from last year. Over the last 5 years, United Community Banks has increased its dividend 4 times on a year-over-year basis for an average annual increase of 6.51%. 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. United Community Banks's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
UCB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $2.64 per share, representing a year-over-year earnings growth rate of 14.78%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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 have to be mindful 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 UCB 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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United Community Banks, Inc. (UCB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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