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Why Tronox (TROX) is a Great Dividend Stock Right Now

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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.

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.

Tronox in Focus

Based in Grimsby, Tronox (TROX - Free Report) is in the Basic Materials sector, and so far this year, shares have seen a price change of -22.68%. The producer of titanium ore and titanium dioxide is paying out a dividend of $0.13 per share at the moment, with a dividend yield of 2.69% compared to the Chemical - Diversified industry's yield of 1.57% and the S&P 500's yield of 1.43%.

In terms of dividend growth, the company's current annualized dividend of $0.50 is up 38.9% from last year. In the past five-year period, Tronox has increased its dividend 2 times on a year-over-year basis for an average annual increase of 19.41%. 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. Tronox's current payout ratio is 17%. This means it paid out 17% of its trailing 12-month EPS as dividend.

TROX is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $3.12 per share, representing a year-over-year earnings growth rate of 36.24%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. With that in mind, TROX 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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