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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
NRG Energy in Focus
Based in Houston, NRG Energy (NRG - Free Report) is in the Utilities sector, and so far this year, shares have seen a price change of 16.06%. The power company is currently shelling out a dividend of $0.38 per share, with a dividend yield of 4.09%. This compares to the Utility - Electric Power industry's yield of 3.65% and the S&P 500's yield of 1.62%.
In terms of dividend growth, the company's current annualized dividend of $1.51 is up 7.9% from last year. In the past five-year period, NRG Energy has increased its dividend 4 times on a year-over-year basis for an average annual increase of 88.27%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. NRG's current payout ratio is 48%. This means it paid out 48% of its trailing 12-month EPS as dividend.
NRG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $4.66 per share, representing a year-over-year earnings growth rate of 77.86%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, NRG 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).
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NRG Energy (NRG) Could Be a Great Choice
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
NRG Energy in Focus
Based in Houston, NRG Energy (NRG - Free Report) is in the Utilities sector, and so far this year, shares have seen a price change of 16.06%. The power company is currently shelling out a dividend of $0.38 per share, with a dividend yield of 4.09%. This compares to the Utility - Electric Power industry's yield of 3.65% and the S&P 500's yield of 1.62%.
In terms of dividend growth, the company's current annualized dividend of $1.51 is up 7.9% from last year. In the past five-year period, NRG Energy has increased its dividend 4 times on a year-over-year basis for an average annual increase of 88.27%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. NRG's current payout ratio is 48%. This means it paid out 48% of its trailing 12-month EPS as dividend.
NRG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $4.66 per share, representing a year-over-year earnings growth rate of 77.86%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, NRG 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).