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Spartan Stores (SPTN) is a Top Dividend Stock Right Now: Should You Buy?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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.
Spartan Stores in Focus
Based in Grand Rapids, Spartan Stores (SPTN - Free Report) is in the Retail-Wholesale sector, and so far this year, shares have seen a price change of 23.21%. Currently paying a dividend of $0.21 per share, the company has a dividend yield of 2.65%. In comparison, the Food - Natural Foods Products industry's yield is 1.2%, while the S&P 500's yield is 1.65%.
Looking at dividend growth, the company's current annualized dividend of $0.84 is up 5% from last year. Over the last 5 years, Spartan Stores has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.28%. 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. Spartan Stores's current payout ratio is 42%, meaning it paid out 42% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, SPTN expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $2.30 per share, which represents a year-over-year growth rate of 35.29%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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 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 SPTN is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).