Are You Looking for a High-Growth Dividend Stock?

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.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

Fifth Third Bancorp in Focus

Fifth Third Bancorp (FITB) is headquartered in Cincinnati, and is in the Finance sector. The stock has seen a price change of 4.87% since the start of the year. The company is paying out a dividend of $0.35 per share at the moment, with a dividend yield of 3.87% compared to the Banks - Major Regional industry's yield of 3.65% and the S&P 500's yield of 1.59%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.40 is up 2.9% from last year. Over the last 5 years, Fifth Third Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 8.82%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Fifth Third Bancorp's current payout ratio is 40%, meaning it paid out 40% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, FITB expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $3.27 per share, with earnings expected to increase 1.55% from the year ago period.

Bottom Line

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.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, FITB 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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