Every investor dreams of seeing a healthy return on their investment, be it in the form of stocks, bonds, exchange-traded funds (ETFs), other assets, or a mix of these and other types of investments. Income investors, on the other hand, are primarily concerned with the regular generation of cash flow from all of their liquid assets.
Bond interest, interest from other investments, and dividends are all potential sources of cash flow. One common way to look at dividends is by dividend yield, which is a percentage of the stock price divided by the total dividends paid out to shareholders. According to a large body of academic research, dividends make up a sizable chunk of long-term returns—in some instances, even more than a third of overall returns.
Center Stage: Banco Bilbao Banco Bilbao (BBVA), a financial company with headquarters in Madrid, has had a price movement of 15.81% thus far this year. In comparison to the 3.92% yield in the Banks - Foreign industry and the 1.6% yield in the S&P 500, the bank's current dividend payout of $0.34 per share yields 6.53%.
The current annualized dividend of $0.69 is 67.5% more than last year's dividend, if we look at dividend growth. The dividend of Banco Bilbao has been raised twice in the past five years, for a total of two increases of 9.25% per annum.
A company's payout ratio, which is the percentage of a company's yearly earnings per share that is distributed as dividends, is one factor that will determine any potential increase in dividends in the future. Earnings growth is another factor. Banco Bilbao has distributed 20% of its trailing 12-month EPS to shareholders in the form of a dividend, according to its current payout ratio of 20%.
For this fiscal year, BBVA's earnings growth appears to be good. For 2024, analysts are seeing earnings growth of 10% year over year, with a consensus estimate of $1.54 per share.
Dividends are popular among investors for many reasons, including tax benefits, reduced portfolio risk, and increased returns from equity investments. Having said that, quarterly payouts are not offered by every company.
Consider how unusual it is for a tech startup or large growth company to distribute dividends to their stockholders. Companies having a longer track record of profitability often distribute dividends to their shareholders. Investors seeking income should be aware that high-yielding equities sometimes face difficulties when interest rates are on the rise.
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