Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.
Based in San Antonio, Cullen/Frost Bankers (CFR) is in the Finance sector, and so far this year, shares have seen a price change of 29.11%. The financial holding company is paying out a dividend of $1.03 per share at the moment, with a dividend yield of 2.52% compared to the Banks - Southwest industry's yield of 1.6% and the S&P 500's yield of 1.33%.
Looking at dividend growth, the company's current annualized dividend of $4.12 is up 4.3% 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.
CFR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $10.57 per share, with earnings expected to increase 6.45% from the year ago period.
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.
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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