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Why Bank of America (BAC) is a Top Dividend Stock for Your Portfolio
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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.
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.
Bank of America in Focus
Bank of America (BAC - Free Report) is headquartered in Charlotte, and is in the Finance sector. The stock has seen a price change of -6.79% since the start of the year. Currently paying a dividend of $0.18 per share, the company has a dividend yield of 2.19%. In comparison, the Banks - Major Regional industry's yield is 2.76%, while the S&P 500's yield is 1.81%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.72 is up 9.1% from last year. Bank of America has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 37.70%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Bank of America's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
BAC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $3.05 per share, which represents a year-over-year growth rate of 10.91%.
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.
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 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 BAC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Why Bank of America (BAC) is a Top Dividend Stock for Your Portfolio
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.
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.
Bank of America in Focus
Bank of America (BAC - Free Report) is headquartered in Charlotte, and is in the Finance sector. The stock has seen a price change of -6.79% since the start of the year. Currently paying a dividend of $0.18 per share, the company has a dividend yield of 2.19%. In comparison, the Banks - Major Regional industry's yield is 2.76%, while the S&P 500's yield is 1.81%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.72 is up 9.1% from last year. Bank of America has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 37.70%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Bank of America's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
BAC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $3.05 per share, which represents a year-over-year growth rate of 10.91%.
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.
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 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 BAC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).