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.
Regions Financial in Focus
Regions Financial (RF) is headquartered in Birmingham, and is in the Finance sector. The stock has seen a price change of 3.57% since the start of the year. The holding company for Regions Bank is currently shelling out a dividend of $0.25 per share, with a dividend yield of 4.11%. This compares to the Banks - Southeast industry's yield of 2.26% and the S&P 500's yield of 1.51%.
In terms of dividend growth, the company's current annualized dividend of $1 is up 2% from last year. In the past five-year period, Regions Financial has increased its dividend 4 times on a year-over-year basis for an average annual increase of 13.05%. 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, Regions Financial's payout ratio is 47%, which means it paid out 47% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for RF for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.27 per share, with earnings expected to increase 7.08% 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. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, RF 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
