Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
World Fuel Services in Focus
Headquartered in Miami, World Fuel Services is an Oils-Energy stock that has seen a price change of -0.99% so far this year. The company that services ships, jets and trucks is paying out a dividend of $0.14 per share at the moment, with a dividend yield of 2.07% compared to the Oil and Gas - Refining and Marketing industry's yield of 1.91% and the S&P 500's yield of 1.63%.
Looking at dividend growth, the company's current annualized dividend of $0.56 is up 7.7% from last year. World Fuel Services has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 20.27%. 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. World Fuel Services's current payout ratio is 27%, meaning it paid out 27% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for INT for this fiscal year. The Zacks Consensus Estimate for 2023 is $2.42 per share, which represents a year-over-year growth rate of 18.63%.
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. 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 INT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).