Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Headquartered in San Antonio, Cullen/Frost Bankers (CFR) is a Finance stock that has seen a price change of 9.65% so far this year. Currently paying a dividend of $1.00 per share, the company has a dividend yield of 2.88%. In comparison, the Banks - Southwest industry's yield is 1.67%, while the S&P 500's yield is 1.41%.
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 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CFR expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $10.41 per share, which represents a year-over-year growth rate of 4.83%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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 CFR 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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Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).