Fifth Third Bancorp (FITB) is a Top Dividend Stock Right Now: Should You Buy?

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Fifth Third Bancorp in Focus

Headquartered in Cincinnati, Fifth Third Bancorp (FITB) is a Finance stock that has seen a price change of 18.49% so far this year. The regional bank is currently shelling out a dividend of $0.22 per share, with a dividend yield of 3.16%. This compares to the Banks - Major Regional industry's yield of 2.86% and the S&P 500's yield of 1.94%.

Looking at dividend growth, the company's current annualized dividend of $0.88 is up 18.9% from last year. Fifth Third Bancorp has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 10.88%. 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. Right now, Fifth Third's payout ratio is 34%, which means it paid out 34% of its trailing 12-month EPS as dividend.

FITB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.80 per share, which represents a year-over-year growth rate of 10.24%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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, 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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