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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Paychex in Focus
Headquartered in Rochester, Paychex (PAYX - Free Report) is a Business Services stock that has seen a price change of 4.49% so far this year. The payroll processor and human-resources services provider is paying out a dividend of $0.56 per share at the moment, with a dividend yield of 3.15% compared to the Outsourcing industry's yield of 0.99% and the S&P 500's yield of 1.83%.
Looking at dividend growth, the company's current annualized dividend of $2.24 is up 8.7% from last year. In the past five-year period, Paychex has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.40%. 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. Paychex's current payout ratio is 91%. This means it paid out 91% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PAYX expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $2.84 per share, representing a year-over-year earnings growth rate of 11.37%.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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 PAYX 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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Is Paychex (PAYX) a Great Dividend Play?
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Paychex in Focus
Headquartered in Rochester, Paychex (PAYX - Free Report) is a Business Services stock that has seen a price change of 4.49% so far this year. The payroll processor and human-resources services provider is paying out a dividend of $0.56 per share at the moment, with a dividend yield of 3.15% compared to the Outsourcing industry's yield of 0.99% and the S&P 500's yield of 1.83%.
Looking at dividend growth, the company's current annualized dividend of $2.24 is up 8.7% from last year. In the past five-year period, Paychex has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.40%. 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. Paychex's current payout ratio is 91%. This means it paid out 91% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PAYX expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $2.84 per share, representing a year-over-year earnings growth rate of 11.37%.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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 PAYX is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).