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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. However, 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 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 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
Headquartered in Pittsburgh, The PNC Financial Services Group, Inc (PNC) is a Finance stock that has seen a price change of -9.46% so far this year. The company is currently shelling out a dividend of $1.6 per share, with a dividend yield of 3.67%. This compares to the Financial - Investment Bank industry's yield of 1.02% and the S&P 500's yield of 1.58%.
In terms of dividend growth, the company's current annualized dividend of $6.40 is up 1.6% from last year. The PNC Financial Services Group, Inc has increased its dividend 4 times on a year-over-year basis over the last 5 years 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%, meaning it paid out 46% of its trailing 12-month EPS as dividend.
PNC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $15.37 per share, with earnings expected to increase 10.50% from the year ago period.
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. But, not every company offers 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that PNC is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).