Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.
BankUnited, Inc. In Focus
Based in Miami Lakes, BankUnited, Inc. (BKU) is in the Finance sector, and so far this year, shares have seen a price change of -21.88%. The company is paying out a dividend of $0.29 per share at the moment, with a dividend yield of 3.89% compared to the Banks - Major Regional industry's yield of 4.19% and the S&P 500's yield of 1.7%.
In terms of dividend growth, the company's current annualized dividend of $1.16 is up 1.8% from last year. Over the last 5 years, BankUnited, Inc. has increased its dividend 4 times on a year-over-year basis for an average annual increase of 6.19%. 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. BankUnited's current payout ratio is 38%, meaning it paid out 38% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BKU expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $3.15 per share, representing a year-over-year earnings growth rate of 2.27%.
Bottom Line
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 their 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. That said, they can take comfort from the fact that BKU 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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BankUnited, Inc. (BKU): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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