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 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.
Banco De Chile in Focus
Banco De Chile (BCH) is headquartered in Santiago, and is in the Finance sector. The stock has seen a price change of 30.16% since the start of the year. Currently paying a dividend of $1.57 per share, the company has a dividend yield of 5.32%. In comparison, the Banks - Foreign industry's yield is 3.73%, while the S&P 500's yield is 1.63%.
Looking at dividend growth, the company's current annualized dividend of $1.57 is up 27.1% from last year. In the past five-year period, Banco De Chile has increased its dividend 3 times on a year-over-year basis for an average annual increase of 67.08%. 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. Banco De Chile's current payout ratio is 49%. This means it paid out 49% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BCH for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.45 per share, which represents a year-over-year growth rate of 2.08%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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. That said, they can take comfort from the fact that BCH is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Banco De Chile (BCH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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