Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
CVB Financial in Focus
CVB Financial (CVBF) is headquartered in Ontario, and is in the Finance sector. The stock has seen a price change of -6.1% since the start of the year. The bank holding company is paying out a dividend of $0.2 per share at the moment, with a dividend yield of 3.31% compared to the Banks - West industry's yield of 2.46% and the S&P 500's yield of 1.63%.
In terms of dividend growth, the company's current annualized dividend of $0.80 is up 3.9% from last year. CVB Financial has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 7.03%. 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. Right now, CVB Financial's payout ratio is 49%, which means it paid out 49% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CVBF expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $1.94 per share, with earnings expected to increase 16.17% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. With that in mind, CVBF 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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