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Why Eastman Chemical (EMN) is a Great Dividend Stock Right Now

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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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Eastman Chemical in Focus

Eastman Chemical (EMN - Free Report) is headquartered in Kingsport, and is in the Basic Materials sector. The stock has seen a price change of 15.38% since the start of the year. The specialty chemicals maker is currently shelling out a dividend of $0.69 per share, with a dividend yield of 2.39%. This compares to the Chemical - Diversified industry's yield of 1.5% and the S&P 500's yield of 1.35%.

In terms of dividend growth, the company's current annualized dividend of $2.76 is up 3.4% from last year. Over the last 5 years, Eastman Chemical has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.46%. 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. Right now, Eastman Chemical's payout ratio is 35%, which means it paid out 35% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, EMN expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $9.23 per share, which represents a year-over-year growth rate of 50.08%.

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. But, not every company offers 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, EMN 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).


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