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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
CVB Financial in Focus
Based in Ontario, CVB Financial (CVBF) is in the Finance sector, and so far this year, shares have seen a price change of 19.15%. The bank holding company is paying out a dividend of $0.19 per share at the moment, with a dividend yield of 2.98% compared to the Banks - West industry's yield of 2.62% and the S&P 500's yield of 1.85%.
In terms of dividend growth, the company's current annualized dividend of $0.76 is up 5.6% from last year. Over the last 5 years, CVB Financial has increased its dividend 3 times on a year-over-year basis for an average annual increase of 7.45%. 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, CVB Financial's payout ratio is 52%, which means it paid out 52% of its trailing 12-month EPS as dividend.
CVBF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $1.65 per share, which represents a year-over-year growth rate of 5.77%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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. 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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