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.
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.
Timken in Focus
Based in North Canton, Timken (TKR - Free Report) is in the Industrial Products sector, and so far this year, shares have seen a price change of -11.11%. The maker of bearings and power transmissions is currently shelling out a dividend of $0.31 per share, with a dividend yield of 2.01%. This compares to the Metal Products - Procurement and Fabrication industry's yield of 0.53% and the S&P 500's yield of 1.8%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.24 is up 4.2% from last year. Timken has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 2.50%. 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. Timken's current payout ratio is 24%, meaning it paid out 24% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for TKR for this fiscal year. The Zacks Consensus Estimate for 2022 is $5.63 per share, with earnings expected to increase 19.28% from the year ago period.
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.
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. 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, TKR 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).
Research Chief 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.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners Up
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.
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.
Timken in Focus
Based in North Canton, Timken (TKR - Free Report) is in the Industrial Products sector, and so far this year, shares have seen a price change of -11.11%. The maker of bearings and power transmissions is currently shelling out a dividend of $0.31 per share, with a dividend yield of 2.01%. This compares to the Metal Products - Procurement and Fabrication industry's yield of 0.53% and the S&P 500's yield of 1.8%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.24 is up 4.2% from last year. Timken has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 2.50%. 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. Timken's current payout ratio is 24%, meaning it paid out 24% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for TKR for this fiscal year. The Zacks Consensus Estimate for 2022 is $5.63 per share, with earnings expected to increase 19.28% from the year ago period.
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.
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. 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, TKR 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).
Research Chief 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.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners Up
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