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.
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.
Progressive in Focus
Headquartered in Mayfield Village, Progressive (PGR - Free Report) is a Finance stock that has seen a price change of 19.49% so far this year. The insurer is paying out a dividend of $2.51 per share at the moment, with a dividend yield of 3.49% compared to the Insurance - Property and Casualty industry's yield of 1.6% and the S&P 500's yield of 1.93%.
Looking at dividend growth, the company's current annualized dividend of $2.51 is up 123.1% from last year. Over the last 5 years, Progressive has increased its dividend 4 times on a year-over-year basis for an average annual increase of 17.12%. 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. Progressive's current payout ratio is 25%. This means it paid out 25% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PGR for this fiscal year. The Zacks Consensus Estimate for 2019 is $5.07 per share, representing a year-over-year earnings growth rate of 14.71%.
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. That said, they can take comfort from the fact that PGR is not only an attractive dividend play, but is also a compelling investment opportunity with a 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.
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.
Progressive in Focus
Headquartered in Mayfield Village, Progressive (PGR - Free Report) is a Finance stock that has seen a price change of 19.49% so far this year. The insurer is paying out a dividend of $2.51 per share at the moment, with a dividend yield of 3.49% compared to the Insurance - Property and Casualty industry's yield of 1.6% and the S&P 500's yield of 1.93%.
Looking at dividend growth, the company's current annualized dividend of $2.51 is up 123.1% from last year. Over the last 5 years, Progressive has increased its dividend 4 times on a year-over-year basis for an average annual increase of 17.12%. 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. Progressive's current payout ratio is 25%. This means it paid out 25% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PGR for this fiscal year. The Zacks Consensus Estimate for 2019 is $5.07 per share, representing a year-over-year earnings growth rate of 14.71%.
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. That said, they can take comfort from the fact that PGR is not only an attractive dividend play, but is also a compelling investment opportunity with a 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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