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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Artesian Resources in Focus
Based in Newark, Artesian Resources (ARTNA - Free Report) is in the Utilities sector, and so far this year, shares have seen a price change of -3.6%. The water resource management company is currently shelling out a dividend of $0.25 per share, with a dividend yield of 2.78%. This compares to the Utility - Water Supply industry's yield of 1.7% and the S&P 500's yield of 1.63%.
In terms of dividend growth, the company's current annualized dividend of $1 is up 1.6% from last year. In the past five-year period, Artesian Resources has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.96%. 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. Artesian Resources's current payout ratio is 57%. This means it paid out 57% of its trailing 12-month EPS as dividend.
ARTNA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $1.68 per share, representing a year-over-year earnings growth rate of 5%.
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.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, ARTNA 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).