All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
BankUnited, Inc. In Focus
Headquartered in Miami Lakes, BankUnited, Inc. (BKU) is a Finance stock that has seen a price change of -11.89% so far this year. The company is currently shelling out a dividend of $0.31 per share, with a dividend yield of 3.69%. This compares to the Banks - Major Regional industry's yield of 4.14% and the S&P 500's yield of 1.65%.
In terms of dividend growth, the company's current annualized dividend of $1.24 is up 8.8% from last year. In the past five-year period, BankUnited, Inc. has increased its dividend 4 times on a year-over-year basis for an average annual increase of 6.19%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, BankUnited's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BKU for this fiscal year. The Zacks Consensus Estimate for 2025 is $3.15 per share, which represents a year-over-year growth rate of 2.27%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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. 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 BKU is not only an attractive dividend play, but is also 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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