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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Headquartered in La Molina, Credicorp (BAP) is a Finance stock that has seen a price change of 26.93% so far this year. The Peruvian finance company is currently shelling out a dividend of $14.48 per share, with a dividend yield of 3.97%. This compares to the Banks - Foreign industry's yield of 2.75% and the S&P 500's yield of 1.4%.
Looking at dividend growth, the company's current annualized dividend of $14.48 is up 31.5% from last year. Over the last 5 years, Credicorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 24.68%. 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. Credicorp's current payout ratio is 42%, meaning it paid out 42% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BAP expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $29.62 per share, which represents a year-over-year growth rate of 21.64%.
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.
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. 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 BAP is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Credicorp Ltd. (BAP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).