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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
First Horizon National in Focus
First Horizon National (FHN) is headquartered in Memphis, and is in the Finance sector. The stock has seen a price change of 8.36% since the start of the year. The bank holding company is currently shelling out a dividend of $0.14 per share, with a dividend yield of 3.93%. This compares to the Banks - Southeast industry's yield of 1.78% and the S&P 500's yield of 1.97%.
Looking at dividend growth, the company's current annualized dividend of $0.56 is up 16.7% from last year. In the past five-year period, First Horizon National has increased its dividend 5 times on a year-over-year basis for an average annual increase of 24.44%. 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. First Horizon's current payout ratio is 39%. This means it paid out 39% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FHN for this fiscal year. The Zacks Consensus Estimate for 2019 is $1.48 per share, representing a year-over-year earnings growth rate of 4.96%.
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.
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, FHN presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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First Horizon National Corporation (FHN) : Free Stock Analysis Report
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