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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
BankUnited, Inc. In Focus
Headquartered in Miami Lakes, BankUnited, Inc. (BKU) is a Finance stock that has seen a price change of 5% so far this year. The company is currently shelling out a dividend of $0.29 per share, with a dividend yield of 2.89%. This compares to the Banks - Major Regional industry's yield of 3.21% and the S&P 500's yield of 1.52%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.16 is up 1.8% from last year. In the past five-year period, BankUnited, Inc. has increased its dividend 4 times on a year-over-year basis for an average annual increase of 6.40%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, BankUnited's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
BKU is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $3.13 per share, representing a year-over-year earnings growth rate of 1.62%.
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. 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, BKU 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).