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Gildan Activewear (GIL) 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. 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.

Gildan Activewear in Focus

Gildan Activewear (GIL - Free Report) is headquartered in Montreal, and is in the Consumer Discretionary sector. The stock has seen a price change of -26.78% since the start of the year. The apparel maker is paying out a dividend of $0.17 per share at the moment, with a dividend yield of 2.18% compared to the Textile - Apparel industry's yield of 0.13% and the S&P 500's yield of 1.76%.

Looking at dividend growth, the company's current annualized dividend of $0.68 is up 47.2% from last year. Over the last 5 years, Gildan Activewear has increased its dividend 4 times on a year-over-year basis for an average annual increase of 7.85%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Gildan's payout ratio is 21%, which means it paid out 21% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, GIL expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.11 per share, with earnings expected to increase 14.34% from the year ago period.

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.

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. That said, they can take comfort from the fact that GIL is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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