Popular (BPOP) Could Be a Great Choice

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.

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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Popular in Focus

Headquartered in Hato Rey, Popular (BPOP) is a Finance stock that has seen a price change of 12.43% so far this year. The company that runs Banco Popular and other banks in Puerto Rico and the U.S. Is currently shelling out a dividend of $1.4 per share, with a dividend yield of 2.65%. This compares to the Banks - Southeast industry's yield of 2.41% and the S&P 500's yield of 1.53%.

In terms of dividend growth, the company's current annualized dividend of $2.80 is up 9.4% from last year. Popular has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 12.86%. 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. Popular's current payout ratio is 29%, meaning it paid out 29% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BPOP for this fiscal year. The Zacks Consensus Estimate for 2025 is $10.54 per share, representing a year-over-year earnings growth rate of 17.11%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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 BPOP is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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Source Zacks-com