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Is Eversource Energy (ES) a High-Growth Dividend Stock?

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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.

Eversource Energy in Focus

Based in Springfield, Eversource Energy (ES - Free Report) is in the Utilities sector, and so far this year, shares have seen a price change of -7.47%. Currently paying a dividend of $0.5 per share, the company has a dividend yield of 3.46%. In comparison, the Utility - Electric Power industry's yield is 3.33%, while the S&P 500's yield is 1.78%.

Looking at dividend growth, the company's current annualized dividend of $2.02 is up 6.3% from last year. Over the last 5 years, Eversource Energy has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.72%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Eversource's current payout ratio is 64%. This means it paid out 64% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for ES for this fiscal year. The Zacks Consensus Estimate for 2018 is $3.25 per share, representing a year-over-year earnings growth rate of 4.50%.

Bottom Line

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.

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. That said, they can take comfort from the fact that ES 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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