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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
BGC Partners in Focus
BGC Partners (BGCP - Free Report) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 2.9% since the start of the year. The brokerage company is currently shelling out a dividend of $6.13 per share, with a dividend yield of 57%. This compares to the Financial - Investment Bank industry's yield of 15% and the S&P 500's yield of 0.18%.
Looking at dividend growth, the company's current annualized dividend of $6.29 is up 11.5% from last year. In the past five-year period, BGC Partners has increased its dividend 0 times on a year-over-year basis for an average annual increase of 3%. 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. BGC Partners's current payout ratio is -22.24%, meaning it paid out -22.24% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BGCP for this fiscal year. The Zacks Consensus Estimate for 2018 is $0.72 per share, with earnings expected to increase 1.50% from the year ago period.
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. 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 BGCP is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).