Why Cullen/frost Bankers (cfr) Is A Great Dividend Stock Right Now

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 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 13.88%. The financial holding company is currently shelling out a dividend of $1.00 per share, with a dividend yield of 2.77%. This compares to the Banks - Southwest industry's yield of 1.41% and the S&P 500's yield of 1.37%.

Looking at dividend growth, the company's current annualized dividend of $4.00 is up 1.3% 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 40%, meaning it paid out 40% 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 $10.18 per share, with earnings expected to increase 2.52% from the year ago period.

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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 its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that CFR is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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