All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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
Based in Bryn Mawr, Essential Utilities (WTRG - Free Report) is in the Utilities sector, and so far this year, shares have seen a price change of 0.21%. The water utility is paying out a dividend of $0.27 per share at the moment, with a dividend yield of 2.26% compared to the Utility - Water Supply industry's yield of 1.55% and the S&P 500's yield of 1.35%.
Looking at dividend growth, the company's current annualized dividend of $1.07 is up 10.3% from last year. Essential Utilities has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.05%. 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. Right now, Essential Utilities's payout ratio is 58%, which means it paid out 58% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for WTRG for this fiscal year. The Zacks Consensus Estimate for 2021 is $1.67 per share, which represents a year-over-year growth rate of 5.70%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, WTRG 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).
Zacks Naming Top 10 Stocks for 2024
Want to be tipped off early to our 10 top picks for the entirety of 2024?
History suggests their performance could be sensational.
From 2012 (when our Director of Research, Sheraz Mian assumed responsibility for the portfolio) through November, 2023, the Zacks Top 10 Stocks gained +974.1%, nearly TRIPLING the S&P 500’s +340.1%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2024. Don’t miss your chance to get in on these stocks when they’re released on January 2.
Be First to New Top 10 Stocks >>
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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
Based in Bryn Mawr, Essential Utilities (WTRG - Free Report) is in the Utilities sector, and so far this year, shares have seen a price change of 0.21%. The water utility is paying out a dividend of $0.27 per share at the moment, with a dividend yield of 2.26% compared to the Utility - Water Supply industry's yield of 1.55% and the S&P 500's yield of 1.35%.
Looking at dividend growth, the company's current annualized dividend of $1.07 is up 10.3% from last year. Essential Utilities has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.05%. 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. Right now, Essential Utilities's payout ratio is 58%, which means it paid out 58% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for WTRG for this fiscal year. The Zacks Consensus Estimate for 2021 is $1.67 per share, which represents a year-over-year growth rate of 5.70%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, WTRG 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).
Zacks Naming Top 10 Stocks for 2024
Want to be tipped off early to our 10 top picks for the entirety of 2024?
History suggests their performance could be sensational.
From 2012 (when our Director of Research, Sheraz Mian assumed responsibility for the portfolio) through November, 2023, the Zacks Top 10 Stocks gained +974.1%, nearly TRIPLING the S&P 500’s +340.1%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2024. Don’t miss your chance to get in on these stocks when they’re released on January 2.
Be First to New Top 10 Stocks >>
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