All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Eaton in Focus
Eaton (ETN - Free Report) is headquartered in Dublin, and is in the Industrial Products sector. The stock has seen a price change of 6.03% since the start of the year. The power management company is currently shelling out a dividend of $1.72 per share, with a dividend yield of 2.07%. This compares to the Manufacturing - Electronics industry's yield of 1.04% and the S&P 500's yield of 1.78%.
Looking at dividend growth, the company's current annualized dividend of $3.44 is up 6.2% from last year. Eaton has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.98%. 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, Eaton's payout ratio is 44%, which means it paid out 44% of its trailing 12-month EPS as dividend.
ETN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $8.39 per share, with earnings expected to increase 10.83% 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. 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, ETN 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).
Free Report Reveals How You Could Profit from the Growing Electric Vehicle Industry
Globally, electric car sales continue their remarkable growth even after breaking records in 2021. High gas prices have fueled his demand, but so has evolving EV comfort, features and technology. So, the fervor for EVs will be around long after gas prices normalize. Not only are manufacturers seeing record-high profits, but producers of EV-related technology are raking in the dough as well. Do you know how to cash in? If not, we have the perfect report for you – and it’s FREE! Today, don't miss your chance to download Zacks' top 5 stocks for the electric vehicle revolution at no cost and with no obligation.
>>Send me my free report on the top 5 EV stocks<<
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Eaton in Focus
Eaton (ETN - Free Report) is headquartered in Dublin, and is in the Industrial Products sector. The stock has seen a price change of 6.03% since the start of the year. The power management company is currently shelling out a dividend of $1.72 per share, with a dividend yield of 2.07%. This compares to the Manufacturing - Electronics industry's yield of 1.04% and the S&P 500's yield of 1.78%.
Looking at dividend growth, the company's current annualized dividend of $3.44 is up 6.2% from last year. Eaton has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.98%. 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, Eaton's payout ratio is 44%, which means it paid out 44% of its trailing 12-month EPS as dividend.
ETN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $8.39 per share, with earnings expected to increase 10.83% 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. 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, ETN 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).
Free Report Reveals How You Could Profit from the Growing Electric Vehicle Industry
Globally, electric car sales continue their remarkable growth even after breaking records in 2021. High gas prices have fueled his demand, but so has evolving EV comfort, features and technology. So, the fervor for EVs will be around long after gas prices normalize. Not only are manufacturers seeing record-high profits, but producers of EV-related technology are raking in the dough as well. Do you know how to cash in? If not, we have the perfect report for you – and it’s FREE! Today, don't miss your chance to download Zacks' top 5 stocks for the electric vehicle revolution at no cost and with no obligation.
>>Send me my free report on the top 5 EV stocks<<
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