Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Barclays in Focus
Barclays (BCS) is headquartered in London, and is in the Finance sector. The stock has seen a price change of 10.76% since the start of the year. The financial holding company is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 3.77% compared to the Banks - Foreign industry's yield of 4.12% and the S&P 500's yield of 1.69%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.55 is up 34.1% from last year. Over the last 5 years, Barclays has increased its dividend 5 times on a year-over-year basis for an average annual increase of 45.04%. 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. Right now, Barclays's payout ratio is 16%, which means it paid out 16% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BCS for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.10 per share, which represents a year-over-year growth rate of 14.13%.
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.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BCS presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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Barclays PLC (BCS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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