All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Otter Tail in Focus
Headquartered in Fergus Falls, Otter Tail (OTTR - Free Report) is a Utilities stock that has seen a price change of 25.51% so far this year. The power company and manufacturer is currently shelling out a dividend of $0.39 per share, with a dividend yield of 2.92%. This compares to the Utility - Electric Power industry's yield of 3.2% and the S&P 500's yield of 1.36%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.56 is up 5.4% from last year. Otter Tail has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.82%. 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. Otter Tail's current payout ratio is 51%. This means it paid out 51% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, OTTR expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.55 per share, which represents a year-over-year growth rate of 8.97%.
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. It's important to keep in mind that not all companies provide 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, OTTR is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Otter Tail in Focus
Headquartered in Fergus Falls, Otter Tail (OTTR - Free Report) is a Utilities stock that has seen a price change of 25.51% so far this year. The power company and manufacturer is currently shelling out a dividend of $0.39 per share, with a dividend yield of 2.92%. This compares to the Utility - Electric Power industry's yield of 3.2% and the S&P 500's yield of 1.36%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.56 is up 5.4% from last year. Otter Tail has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.82%. 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. Otter Tail's current payout ratio is 51%. This means it paid out 51% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, OTTR expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.55 per share, which represents a year-over-year growth rate of 8.97%.
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. It's important to keep in mind that not all companies provide 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, OTTR is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
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