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.
Cash flow can come from bond interest, interest from other types of investments, and, of course, 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.
Cullen/Frost Bankers (CFR) is headquartered in San Antonio, and is in the Finance sector. The stock has seen a price change of 10.75% since the start of the year. The financial holding company is currently shelling out a dividend of $1.00 per share, with a dividend yield of 2.85%. This compares to the Banks - Southwest industry's yield of 1.77% and the S&P 500's yield of 1.47%.
Looking at dividend growth, the company's current annualized dividend of $4.00 is up 1.3% from last year. Over the last 5 years, Cullen/Frost Bankers has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.98%. 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. Cullen/Frost's current payout ratio is 40%, meaning it paid out 40% of its trailing 12-month EPS as dividend.
CFR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $10.20 per share, which represents a year-over-year growth rate of 2.72%.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CFR 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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Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).