NatWest Group (NWG) 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 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.

NatWest Group (NWG) is headquartered in London, and is in the Finance sector. The stock has seen a price change of 41.89% since the start of the year. The bank is currently shelling out a dividend of $0.25 per share, with a dividend yield of 3.45%. This compares to the Banks - Foreign industry's yield of 3.02% and the S&P 500's yield of 1.49%.

Looking at dividend growth, the company's current annualized dividend of $0.50 is up 13.6% from last year. Over the last 5 years, NatWest Group has increased its dividend 5 times on a year-over-year basis for an average annual increase of 47.67%. 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. NatWest's current payout ratio is 50%, meaning it paid out 50% of its trailing 12-month EPS as dividend.

NWG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $1.61 per share, with earnings expected to increase 21.05% from the year ago period.

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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, NWG 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