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McGrath (MGRC) is a Top Dividend Stock Right Now: Should You Buy?

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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 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.

McGrath in Focus

Headquartered in Livermore, McGrath (MGRC - Free Report) is a Finance stock that has seen a price change of 4.44% so far this year. The business-to-business rental company is currently shelling out a dividend of $0.46 per share, with a dividend yield of 2.17%. This compares to the Financial - Leasing Companies industry's yield of 1.08% and the S&P 500's yield of 1.62%.

In terms of dividend growth, the company's current annualized dividend of $1.82 is up 5.5% from last year. Over the last 5 years, McGrath has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.87%. 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. McGrath's current payout ratio is 46%. This means it paid out 46% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, MGRC expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $4.12 per share, representing a year-over-year earnings growth rate of 12.57%.

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. It's important to keep in mind that not all companies provide 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. 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, MGRC 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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