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 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.
Comerica in Focus
Comerica (CMA) is headquartered in Dallas, and is in the Finance sector. The stock has seen a price change of 4.92% since the start of the year. Currently paying a dividend of $0.67 per share, the company has a dividend yield of 3.72%. In comparison, the Banks - Major Regional industry's yield is 2.88%, while the S&P 500's yield is 1.99%.
Looking at dividend growth, the company's current annualized dividend of $2.68 is up 45.7% from last year. In the past five-year period, Comerica has increased its dividend 5 times on a year-over-year basis for an average annual increase of 21.11%. 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. Comerica's current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CMA for this fiscal year. The Zacks Consensus Estimate for 2019 is $8.18 per share, with earnings expected to increase 13.61% 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. 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 their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CMA 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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Comerica Incorporated (CMA) : Free Stock Analysis Report
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