Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Popular in Focus
Headquartered in Hato Rey, Popular (BPOP) is a Finance stock that has seen a price change of 5.31% so far this year. The company that runs Banco Popular and other banks in Puerto Rico and the U.S. Is currently shelling out a dividend of $0.7 per share, with a dividend yield of 2.83%. This compares to the Banks - Southeast industry's yield of 2.33% and the S&P 500's yield of 1.62%.
In terms of dividend growth, the company's current annualized dividend of $2.80 is up 9.4% from last year. Over the last 5 years, Popular has increased its dividend 3 times on a year-over-year basis for an average annual increase of 12.86%. 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. Popular's current payout ratio is 29%, meaning it paid out 29% of its trailing 12-month EPS as dividend.
BPOP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $10.41 per share, representing a year-over-year earnings growth rate of 15.67%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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, BPOP presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Popular, Inc. (BPOP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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