Wells Fargo (WFC) Could Be a Great Choice
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.
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.
Based in San Francisco, Wells Fargo (WFC) is in the Finance sector, and so far this year, shares have seen a price change of 11.28%. The biggest U.S. mortgage lender is paying out a dividend of $0.45 per share at the moment, with a dividend yield of 2.3% compared to the Financial - Investment Bank industry's yield of 1.02% and the S&P 500's yield of 1.5%.
Looking at dividend growth, the company's current annualized dividend of $1.80 is up 20% from last year. Over the last 5 years, Wells Fargo has increased its dividend 4 times on a year-over-year basis for an average annual increase of 36.70%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Wells Fargo's current payout ratio is 28%, meaning it paid out 28% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, WFC expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $6.01 per share, representing a year-over-year earnings growth rate of 11.92%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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. With that in mind, WFC 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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Wells Fargo & Company (WFC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Source Zacks-com
