Mitsubishi UFJ (MUFG) Could Be a Great Choice

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.

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

Based in Tokyo, Mitsubishi UFJ (MUFG) is in the Finance sector, and so far this year, shares have seen a price change of 36.6%. The bank is paying out a dividend of $0.19 per share at the moment, with a dividend yield of 2.36% compared to the Banks - Foreign industry's yield of 2.78% and the S&P 500's yield of 1.41%.

Looking at dividend growth, the company's current annualized dividend of $0.38 is up 8.3% from last year. Over the last 5 years, Mitsubishi UFJ has increased its dividend 3 times on a year-over-year basis for an average annual increase of 13.63%. 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. MUFG's current payout ratio is 32%, meaning it paid out 32% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, MUFG expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $1.27 per share, representing a year-over-year earnings growth rate of 13.39%.

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MUFG 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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This article originally published on Zacks Investment Research (zacks.com).

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Source Zacks-com