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This is Why OGE Energy (OGE) is a Great Dividend Stock

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.

OGE Energy in Focus

Headquartered in Oklahoma City, OGE Energy (OGE - Free Report) is a Utilities stock that has seen a price change of 10.57% so far this year. The energy services company is currently shelling out a dividend of $0.37 per share, with a dividend yield of 4.01%. This compares to the Utility - Electric Power industry's yield of 3.24% and the S&P 500's yield of 1.9%.

In terms of dividend growth, the company's current annualized dividend of $1.46 is up 17.7% from last year. In the past five-year period, OGE Energy has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.27%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, OGE Energy's payout ratio is 65%, which means it paid out 65% of its trailing 12-month EPS as dividend.

OGE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $2.03 per share, which represents a year-over-year growth rate of 5.73%.

Bottom Line

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.

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 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 OGE 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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