Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Based in Nashville, Pinnacle Financial (PNFP) is in the Finance sector, and so far this year, shares have seen a price change of 4.34%. The regional bank operator is currently shelling out a dividend of $0.50 per share, with a dividend yield of 2.01%. This compares to the Banks - Southeast industry's yield of 1.98% and the S&P 500's yield of 1.36%.
Looking at dividend growth, the company's current annualized dividend of $2.00 is up 108.3% from last year. Over the last 5 years, Pinnacle Financial has increased its dividend 3 times on a year-over-year basis for an average annual increase of 7.56%. 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. Pinnacle Financial's current payout ratio is 11%, meaning it paid out 11% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PNFP expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $10.24 per share, representing a year-over-year earnings growth rate of 22.34%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, PNFP 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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Pinnacle Financial Partners, Inc. (PNFP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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