All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
Headquartered in London, NatWest Group (NWG) is a Finance stock that has seen a price change of -10.4% so far this year. The bank is paying out a dividend of $0.61 per share at the moment, with a dividend yield of 7.73% compared to the Banks - Foreign industry's yield of 2.72% and the S&P 500's yield of 1.41%.
Looking at dividend growth, the company's current annualized dividend of $1.21 is up 90.6% 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 28%, meaning it paid out 28% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for NWG for this fiscal year. The Zacks Consensus Estimate for 2026 is $1.94 per share, representing a year-over-year earnings growth rate of 8.38%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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, 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).
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NatWest Group plc (NWG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).