Returns from investing in shares can primarily be reaped in two ways, capital appreciation and dividends. Let’s focus on and understand how regular dividends are beneficial for an investor and a company.
Here’s What Dividends Mean to Investors
Dividends create a reliable source of return without having to sell the shares. The payment of dividends is more dependable than capital appreciation on shares. With the incorporation of dividend-paying stocks in their portfolio, one can expect returns even in a volatile market. Investors also get a tax advantage from dividends, making it more attractive.
Dividend stocks are a lucrative option for investors looking for regular returns without having to wait for the shares to move up. Dividend investors target companies with a consistent dividend payment history and steady growth.
Interpublic Group ( IPG Quick Quote IPG - Free Report) , Omnicom Group ( OMC Quick Quote OMC - Free Report) , Robert Half ( RHI Quick Quote RHI - Free Report) and Western Union ( WU Quick Quote WU - Free Report) are some of the dividend-paying companies from the broader Zacks Business Services sector. While IPG and OMC carry a Zacks Rank #2 (Buy), RHI and WU have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. How Does a Dividend-Paying Company Benefit?
A regular dividend-paying company is expected to have higher investor loyalty compared to a company not paying dividends. A company with a dividend-paying history is likely to recover faster after a major correction in the market compared to its non-dividend-paying peers.
Factors to Consider While Picking Dividend Stocks
Dividend-paying stocks are rewarding but a rational investor should always make an informed decision. Some of the aspects that need to be considered while selecting stocks that will accomplish your dividend investing goals include its payout ratio, payment history, yield, and revenue and earnings growth
The payout ratio indicates how much a company is distributing as dividend from its earnings per share. A low payout indicates sustainable dividend payment. Consistent dividend payment, especially during tough times, is expected to grab investor attention. Yield is the annualized dividend as a percentage of the stock price. Selecting dividend payers with a track record of steady revenue and earnings growth and high yield ensures returns over the long term.
Our Dividend Picks
We ran the Zacks
Stocks Screener to identify the abovementioned stocks with a dividend yield in excess of 2% and five-year historical dividend growth of more than 0.1%. These stocks have a dividend payout ratio of less than 60%.
The Zacks Consensus Estimate for Interpublic Group’s 2023 earnings indicates 7.65% year-over-year growth. The company will pay out a dividend of 31 cents on Jun 20. It has a payout ratio of 47%. The company’s annualized dividend comes at $1.24 a share, currently yielding 3.3%. It has an annualized five-year dividend growth of 8%. (
Check Interpublic’s dividend history here)
The Zacks Consensus Estimate for Omnicom’s earnings indicates growth of 6.9% while the same for revenue indicates 3% growth. Omnicom has a five-year annualized dividend growth rate of 3.5%. The company will pay out a dividend of 70 cents on Jun 8. Its annualized dividend of $2.8 a share currently yields 3.1% with the payout ratio being 39%. (
Check Omnicom's dividend history here)
Robert Half has been a regular dividend payer, having increased its dividend five times in the last five years. The annualized dividend growth rate is 11.4%. The company pays out 34% of its earnings. The Zacks Consensus Estimate for 2023 earnings is currently pegged at $4.29 per share. The company will pay out 48 cents on Jun 15 as dividend. Its annualized dividend of $1.92 a share currently yields 2.8%. (
Check Robert Half’s dividend history here)
Western Union will pay out 24 cents as dividend on Jun 30. It has increased its dividend thrice in the past five years and has an annualized dividend growth of 5.5%. The company’s annualized dividend comes to 94 cents, yielding 8% on a share. It has a payout ratio of 56%. Additionally, the Zacks Consensus Estimate for full-year earnings of the company is pegged at $1.61, which has been revised northward by 1.3% in the past 60 days. (
Check Western Union's dividend history here)