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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.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
The PNC Financial Services Group, Inc in Focus
Based in Pittsburgh, The PNC Financial Services Group, Inc (PNC) is in the Finance sector, and so far this year, shares have seen a price change of -8.26%. The company is paying out a dividend of $1.6 per share at the moment, with a dividend yield of 3.62% compared to the Financial - Investment Bank industry's yield of 1% and the S&P 500's yield of 1.56%.
Looking at dividend growth, the company's current annualized dividend of $6.40 is up 1.6% from last year. In the past five-year period, The PNC Financial Services Group, Inc has increased its dividend 4 times on a year-over-year basis for an average annual increase of 9.10%. 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. The PNC Financial Services Group's current payout ratio is 46%. This means it paid out 46% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PNC expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $15.30 per share, representing a year-over-year earnings growth rate of 9.99%.
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. But, not every company offers 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. 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, PNC 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).