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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.
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.
First American Financial in Focus
Based in Santa Ana, First American Financial (FAF - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -0.99%. The financial services company is currently shelling out a dividend of $0.53 per share, with a dividend yield of 3.32%. This compares to the Insurance - Property and Casualty industry's yield of 0.17% and the S&P 500's yield of 1.54%.
Looking at dividend growth, the company's current annualized dividend of $2.12 is up 1% from last year. Over the last 5 years, First American Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.56%. 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, First American Financial's payout ratio is 58%, which means it paid out 58% of its trailing 12-month EPS as dividend.
FAF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $3.89 per share, which represents a year-over-year growth rate of 2.37%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. With that in mind, FAF 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).
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Are You Looking for a High-Growth Dividend Stock?
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.
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.
First American Financial in Focus
Based in Santa Ana, First American Financial (FAF - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -0.99%. The financial services company is currently shelling out a dividend of $0.53 per share, with a dividend yield of 3.32%. This compares to the Insurance - Property and Casualty industry's yield of 0.17% and the S&P 500's yield of 1.54%.
Looking at dividend growth, the company's current annualized dividend of $2.12 is up 1% from last year. Over the last 5 years, First American Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.56%. 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, First American Financial's payout ratio is 58%, which means it paid out 58% of its trailing 12-month EPS as dividend.
FAF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $3.89 per share, which represents a year-over-year growth rate of 2.37%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. With that in mind, FAF 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).