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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. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Prudential in Focus
Based in Newark, Prudential (PRU - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -4.87%. The financial services company is currently shelling out a dividend of $1.25 per share, with a dividend yield of 5.28%. This compares to the Insurance - Multi line industry's yield of 2.1% and the S&P 500's yield of 1.62%.
In terms of dividend growth, the company's current annualized dividend of $5 is up 4.2% from last year. Prudential has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.61%. 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. Prudential's current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.
PRU is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $11.76 per share, which represents a year-over-year growth rate of 24.31%.
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. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, PRU 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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Prudential (PRU) 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. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Prudential in Focus
Based in Newark, Prudential (PRU - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -4.87%. The financial services company is currently shelling out a dividend of $1.25 per share, with a dividend yield of 5.28%. This compares to the Insurance - Multi line industry's yield of 2.1% and the S&P 500's yield of 1.62%.
In terms of dividend growth, the company's current annualized dividend of $5 is up 4.2% from last year. Prudential has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.61%. 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. Prudential's current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.
PRU is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $11.76 per share, which represents a year-over-year growth rate of 24.31%.
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. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, PRU 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).