All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Cullen/Frost Bankers in Focus
Headquartered in San Antonio, Cullen/Frost Bankers (CFR) is a Finance stock that has seen a price change of -5.71% so far this year. The financial holding company is paying out a dividend of $0.95 per share at the moment, with a dividend yield of 3% compared to the Banks - Southwest industry's yield of 1.22% and the S&P 500's yield of 1.57%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.80 is up 1.6% from last year. In the past five-year period, Cullen/Frost Bankers has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.80%. 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. Cullen/Frost's current payout ratio is 42%, meaning it paid out 42% of its trailing 12-month EPS as dividend.
CFR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $9.17 per share, with earnings expected to increase 2.12% from the year ago period.
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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, CFR 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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Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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