Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 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.
Essential Utilities in Focus
Headquartered in Bryn Mawr, Essential Utilities (WTRG - Free Report) is a Utilities stock that has seen a price change of -9.67% so far this year. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 2.37%. In comparison, the Utility - Water Supply industry's yield is 1.78%, while the S&P 500's yield is 1.64%.
Taking a look at the company's dividend growth, its current annualized dividend of $1 is up 10.3% from last year. In the past five-year period, Essential Utilities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.81%. 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. Essential Utilities's current payout ratio is 55%. This means it paid out 55% of its trailing 12-month EPS as dividend.
WTRG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $1.56 per share, which represents a year-over-year growth rate of 6.12%.
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. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, WTRG presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 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.
Essential Utilities in Focus
Headquartered in Bryn Mawr, Essential Utilities (WTRG - Free Report) is a Utilities stock that has seen a price change of -9.67% so far this year. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 2.37%. In comparison, the Utility - Water Supply industry's yield is 1.78%, while the S&P 500's yield is 1.64%.
Taking a look at the company's dividend growth, its current annualized dividend of $1 is up 10.3% from last year. In the past five-year period, Essential Utilities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.81%. 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. Essential Utilities's current payout ratio is 55%. This means it paid out 55% of its trailing 12-month EPS as dividend.
WTRG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $1.56 per share, which represents a year-over-year growth rate of 6.12%.
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. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, WTRG presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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