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Why Mondelez (MDLZ) is a Top Dividend Stock for Your Portfolio

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.

Mondelez in Focus

Headquartered in Deerfield, Mondelez (MDLZ - Free Report) is a Consumer Staples stock that has seen a price change of -1.83% so far this year. The maker of Oreo cookies, Cadbury chocolate and Trident gum is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 2.11% compared to the Food - Miscellaneous industry's yield of 0.16% and the S&P 500's yield of 1.82%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.14 is up 4.6% from last year. Over the last 5 years, Mondelez has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.84%. 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, Mondelez's payout ratio is 45%, which means it paid out 45% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, MDLZ expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $2.56 per share, representing a year-over-year earnings growth rate of 3.64%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MDLZ 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).


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