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Are You Looking for a High-Growth Dividend Stock? Reinsurance Group (RGA) Could Be a Great Choice

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.

Reinsurance Group in Focus

Headquartered in Chesterfield, Reinsurance Group (RGA - Free Report) is a Finance stock that has seen a price change of -4.06% so far this year. Currently paying a dividend of $0.73 per share, the company has a dividend yield of 2.63%. In comparison, the Insurance - Life Insurance industry's yield is 0.44%, while the S&P 500's yield is 1.41%.

In terms of dividend growth, the company's current annualized dividend of $2.92 is up 4.3% from last year. Over the last 5 years, Reinsurance Group has increased its dividend 4 times on a year-over-year basis for an average annual increase of 14.49%. 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. Reinsurance Group's current payout ratio is 38%, meaning it paid out 38% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, RGA expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $9.48 per share, with earnings expected to increase 25.73% from the year ago period.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious 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 RGA is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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