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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.
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.
U.S. Bancorp in Focus
Based in Minneapolis, U.S. Bancorp (USB) is in the Finance sector, and so far this year, shares have seen a price change of 0.42%. Currently paying a dividend of $0.5 per share, the company has a dividend yield of 4.16%. In comparison, the Banks - Major Regional industry's yield is 3.42%, while the S&P 500's yield is 1.51%.
In terms of dividend growth, the company's current annualized dividend of $2 is up 1% from last year. U.S. Bancorp has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 4.35%. 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, U.S. Bancorp's payout ratio is 51%, which means it paid out 51% of its trailing 12-month EPS as dividend.
USB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $4.32 per share, representing a year-over-year earnings growth rate of 8.54%.
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. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that USB is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).