Earning significant returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is every investor’s dream. But when you’re an income investor, your main goal is to generate 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 profits paid to shareholders; it is often viewed by its dividend yield, a metric that measures a dividend as a percentage of the current stock price. Many academic studies show that dividends account for a significant portion of long-term returns, and in many cases, dividends exceed a third of total returns.
Focus on Shinhan Financial
Based in Seoul, Shinhan Financial (SHG) belongs to the Financial sector, and so far this year, shares have seen a price change of 10.92%. The financial services company currently pays a dividend of $0.31 per share, with a dividend yield of 3.59%. This compares to the Banks – Foreign Industrials sector’s return of 4.66% and the S&P 500’s return of 1.61%.
When it comes to dividend growth, the company’s current annualized dividend of $1.22 is up 31.6% from last year. Shinhan Financial has increased its dividend 2 times year-over-year in the last 5 years, for an average annual increase of 4.62%. Looking ahead, future dividend growth will depend on earnings growth and the payout ratio, which is the proportion of a company’s annual earnings per share that it distributes as dividends. Shinhan Financial’s current payout ratio is 20%. This means that it paid out 20% of its EPS over the trailing 12 months as a dividend.
SHG expects its profits to also increase this financial year. The Zacks Consensus Estimate for 2024 is $6.21 per share, with earnings expected to increase 0.81% from the year-ago period.
Conclusion
Investors like dividends for a variety of reasons, ranging from tax benefits to reducing overall portfolio risk to significantly improving profits from stock investments. It’s important to keep in mind that not all companies pay quarterly dividends.
Large, established companies that have more secure earnings are often considered the best dividend options, but it’s quite rare to see high-growth companies or tech startups offer a dividend to their shareholders. Income investors should be aware that high-yielding stocks tend to struggle during periods of rising interest rates. With this in mind, SHG presents an attractive 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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Shinhan Financial Group Co Ltd (SHG) : Free Stock Analysis Report
