All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Headquartered in San Antonio, Cullen/Frost Bankers (CFR) is a Finance stock that has seen a price change of 10.19% so far this year. The financial holding company is currently shelling out a dividend of $1.00 per share, with a dividend yield of 2.87%. This compares to the Banks - Southwest industry's yield of 1.67% and the S&P 500's yield of 1.42%.
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.
Earnings growth looks solid for CFR for this fiscal year. The Zacks Consensus Estimate for 2026 is $10.46 per share, which represents a year-over-year growth rate of 5.34%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. That said, they can take comfort from the fact that CFR is not only an attractive dividend play, but also represents 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).