Banco Bilbao (BBVA) Could Be a Great Choice

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.

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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Banco Bilbao in Focus

Headquartered in Madrid, Banco Bilbao (BBVA) is a Finance stock that has seen a price change of 57.61% so far this year. Currently paying a dividend of $0.37 per share, the company has a dividend yield of 4.85%. In comparison, the Banks - Foreign industry's yield is 3.4%, while the S&P 500's yield is 1.6%.

Looking at dividend growth, the company's current annualized dividend of $0.74 is up 24.4% from last year. In the past five-year period, Banco Bilbao has increased its dividend 3 times on a year-over-year basis for an average annual increase of 32.42%. 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, Banco Bilbao's payout ratio is 27%, which means it paid out 27% of its trailing 12-month EPS as dividend.

BBVA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $1.84 per share, which represents a year-over-year growth rate of 1.10%.

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. It's important to keep in mind that not all companies provide a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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 BBVA 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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This article originally published on Zacks Investment Research (zacks.com).

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