Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Barclays in Focus
Barclays (BCS) is headquartered in London, and is in the Finance sector. The stock has seen a price change of 32.73% since the start of the year. The financial holding company is currently shelling out a dividend of $0.28 per share, with a dividend yield of 3.14%. This compares to the Banks - Foreign industry's yield of 3.8% and the S&P 500's yield of 1.57%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.55 is up 34.1% from last year. In the past five-year period, Barclays has increased its dividend 5 times on a year-over-year basis for an average annual increase of 45.04%. 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. Barclays's current payout ratio is 28%, meaning it paid out 28% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BCS for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.23 per share, with earnings expected to increase 21.20% from the year ago period.
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. 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 BCS is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Barclays PLC (BCS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
