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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
John Wiley & Sons in Focus
John Wiley & Sons (JW.A - Free Report) is headquartered in Hoboken, and is in the Consumer Staples sector. The stock has seen a price change of -31.9% since the start of the year. The publisher is paying out a dividend of $0.34 per share at the moment, with a dividend yield of 4.15% compared to the Publishing - Books industry's yield of 1.72% and the S&P 500's yield of 1.63%.
Looking at dividend growth, the company's current annualized dividend of $1.37 is up 0.7% from last year. John Wiley & Sons has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 3.06%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. John Wiley & Sons's current payout ratio is 52%, meaning it paid out 52% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, JW.A expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $2.52 per share, with earnings expected to increase 5% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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, JW.A 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).