All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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.
World Fuel Services in Focus
Based in Miami, World Fuel Services is in the Oils-Energy sector, and so far this year, shares have seen a price change of -6.44%. The company that services ships, jets and trucks is currently shelling out a dividend of $0.14 per share, with a dividend yield of 2.19%. This compares to the Oil and Gas - Refining and Marketing industry's yield of 2.22% and the S&P 500's yield of 1.76%.
Taking a look at the company's dividend growth, its 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 19.27%. 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, World Fuel Services's payout ratio is 27%, which means 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 $2.16 per share, which represents a year-over-year growth rate of 5.88%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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, INT is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).