We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Bank of America (BAC) is a Top Dividend Stock Right Now: Should You Buy?
Read MoreHide Full Article
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
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 -23.96% since the start of the year. The nation's second-largest bank is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 2.69% compared to the Banks - Major Regional industry's yield of 3.21% and the S&P 500's yield of 2.04%.
Looking at dividend growth, the company's current annualized dividend of $0.72 is up 9.1% from last year. Over the last 5 years, Bank of America has increased its dividend 4 times on a year-over-year basis for an average annual increase of 37.70%. 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, Bank of America's payout ratio is 25%, which means 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 $3.03 per share, which represents a year-over-year growth rate of 10.18%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. That said, they can take comfort from the fact that BAC is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Bank of America (BAC) is a Top Dividend Stock Right Now: Should You Buy?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
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 -23.96% since the start of the year. The nation's second-largest bank is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 2.69% compared to the Banks - Major Regional industry's yield of 3.21% and the S&P 500's yield of 2.04%.
Looking at dividend growth, the company's current annualized dividend of $0.72 is up 9.1% from last year. Over the last 5 years, Bank of America has increased its dividend 4 times on a year-over-year basis for an average annual increase of 37.70%. 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, Bank of America's payout ratio is 25%, which means 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 $3.03 per share, which represents a year-over-year growth rate of 10.18%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. That said, they can take comfort from the fact that BAC is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).