Why Banco Latinoamericano 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 for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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.

Banco Latinoamericano in Focus

Based in Panama City, Banco Latinoamericano BLX is in the Finance sector, and so far this year, shares have seen a price change of 25.14%. Currently paying a dividend of $0.5 per share, the company has a dividend yield of 6.46%. In comparison, the Banks - Foreign industry's yield is 3.75%, while the S&P 500's yield is 1.56%.

Taking a look at the company's dividend growth, its current annualized dividend of $2 is up 100% from last year. Over the last 5 years, Banco Latinoamericano has increased its dividend 1 times on a year-over-year basis for an average annual increase of 0.89%. 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. Banco Latinoamericano's current payout ratio is 38%, meaning it paid out 38% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BLX for this fiscal year. The Zacks Consensus Estimate for 2024 is $4.60 per share, which represents a year-over-year growth rate of 1.10%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 their 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. With that in mind, BLX 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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