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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
FNF Group in Focus
Headquartered in Jacksonville, FNF Group (FNF - Free Report) is a Finance stock that has seen a price change of -27.19% so far this year. The provider of title insurance and mortgage services is paying out a dividend of $0.33 per share at the moment, with a dividend yield of 4% compared to the Insurance - Property and Casualty industry's yield of 1.28% and the S&P 500's yield of 1.65%.
In terms of dividend growth, the company's current annualized dividend of $1.32 is up 4.8% from last year. In the past five-year period, FNF Group has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.76%. 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. Right now, FNF Group's payout ratio is 34%, which means it paid out 34% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FNF for this fiscal year. The Zacks Consensus Estimate for 2020 is $3.92 per share, which represents a year-over-year growth rate of 15.63%.
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. That said, they can take comfort from the fact that FNF is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).