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Conagra Brands (CAG) is a Top Dividend Stock Right Now: Should You Buy?
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Conagra Brands in Focus
Based in Chicago, Conagra Brands (CAG - Free Report) is in the Consumer Staples sector, and so far this year, shares have seen a price change of 0.67%. Currently paying a dividend of $0.33 per share, the company has a dividend yield of 3.84%. In comparison, the Food - Miscellaneous industry's yield is 0.12%, while the S&P 500's yield is 1.62%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.32 is up 5.6% from last year. Over the last 5 years, Conagra Brands has increased its dividend 2 times on a year-over-year basis for an average annual increase of 9.98%. 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. Right now, Conagra Brands's payout ratio is 54%, which means it paid out 54% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CAG for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.43 per share, which represents a year-over-year growth rate of 2.97%.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CAG is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).