Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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 Greenville, United Community Banks (UCB) is a Finance stock that has seen a price change of 12.08% so far this year. The bank holding company is paying out a dividend of $0.25 per share at the moment, with a dividend yield of 2.86% compared to the Banks - Southeast industry's yield of 1.93% and the S&P 500's yield of 1.34%.
Looking at dividend growth, the company's current annualized dividend of $1.00 is up 2% from last year. Over the last 5 years, United Community Banks has increased its dividend 4 times on a year-over-year basis for an average annual increase of 6.51%. 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. United Community Banks's current payout ratio is 35%, meaning it paid out 35% of its trailing 12-month EPS as dividend.
UCB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $2.92 per share, which represents a year-over-year growth rate of 7.75%.
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.
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. With that in mind, UCB 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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