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Are You Looking for a High-Growth Dividend Stock? Prosperity Bancshares (PB) Could Be a Great Choice

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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 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.

Prosperity Bancshares in Focus

Headquartered in Houston, Prosperity Bancshares (PB) is a Finance stock that has seen a price change of 8.8% so far this year. Currently paying a dividend of $0.41 per share, the company has a dividend yield of 2.42%. In comparison, the Banks - Southwest industry's yield is 1.35%, while the S&P 500's yield is 1.88%.

Looking at dividend growth, the company's current annualized dividend of $1.64 is up 10.1% from last year. In the past five-year period, Prosperity Bancshares has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.72%. 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. Prosperity Bancshares's current payout ratio is 35%, meaning it paid out 35% of its trailing 12-month EPS as dividend.

PB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $4.78 per share, which represents a year-over-year growth rate of 3.69%.

Bottom Line

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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that PB is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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