Why Shinhan Financial (SHG) 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. However, 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.

Headquartered in Seoul, Shinhan Financial (SHG) is a Finance stock that has seen a price change of 33.32% so far this year. Currently paying a dividend of $0.39 per share, the company has a dividend yield of 2.17%. In comparison, the Banks - Foreign industry's yield is 2.67%, while the S&P 500's yield is 1.32%.

Looking at dividend growth, the company's current annualized dividend of $1.55 is up 25.7% from last year. Over the last 5 years, Shinhan Financial has increased its dividend 3 times on a year-over-year basis for an average annual increase of 4.36%. 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. Shinhan Financial's current payout ratio is 21%, meaning it paid out 21% of its trailing 12-month EPS as dividend.

SHG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $8.53 per share, representing a year-over-year earnings growth rate of 23.44%.

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, SHG presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).

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

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