Yahoo Finance Why U.S. Bancorp (USB) is a Great Dividend Stock Right Now
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 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.
U.S. Bancorp in Focus
Headquartered in Minneapolis, U.S. Bancorp (USB) is a Finance stock that has seen a price change of -33.55% so far this year. Currently paying a dividend of $0.48 per share, the company has a dividend yield of 6.63%. In comparison, the Banks - Major Regional industry's yield is 4.33%, while the S&P 500's yield is 1.77%.
Looking at dividend growth, the company's current annualized dividend of $1.92 is up 2.1% from last year. Over the last 5 years, U.S. Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 7.47%. 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. U.S. Bancorp's current payout ratio is 41%. This means it paid out 41% of its trailing 12-month EPS as dividend.
USB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $4.62 per share, which represents a year-over-year growth rate of 3.82%.
Bottom Line
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.
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. 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, USB 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
U.S. Bancorp (USB) : Free Stock Analysis Report
