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Are You Looking for a High-Growth Dividend Stock? PNM Resources (PNM) Could Be a Great Choice

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.

PNM Resources in Focus

Based in Albuquerque, PNM Resources (PNM - Free Report) is in the Utilities sector, and so far this year, shares have seen a price change of -0.04%. The power company is paying out a dividend of $0.35 per share at the moment, with a dividend yield of 3.05% compared to the Utility - Electric Power industry's yield of 3.14% and the S&P 500's yield of 1.49%.

Looking at dividend growth, the company's current annualized dividend of $1.39 is up 6.1% from last year. In the past five-year period, PNM Resources has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.48%. 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. PNM Resources's current payout ratio is 55%. This means it paid out 55% of its trailing 12-month EPS as dividend.

PNM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $2.55 per share, which represents a year-over-year growth rate of 4.08%.

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. 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. With that in mind, PNM 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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