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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 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.
Watsco in Focus
Headquartered in Miami, Watsco (WSO - Free Report) is a Construction stock that has seen a price change of 3.4% so far this year. Currently paying a dividend of $1.45 per share, the company has a dividend yield of 3.3%. In comparison, the Building Products - Air Conditioner and Heating industry's yield is 0.71%, while the S&P 500's yield is 1.77%.
In terms of dividend growth, the company's current annualized dividend of $5.80 is up 26.1% from last year. Watsco has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 35.27%. 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. Watsco's current payout ratio is 97%, meaning it paid out 97% of its trailing 12-month EPS as dividend.
WSO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $6.67 per share, which represents a year-over-year growth rate of 21.72%.
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. It's important to keep in mind that not all companies provide 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. That said, they can take comfort from the fact that WSO is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Is Watsco (WSO) a High-Growth Dividend Stock?
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 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.
Watsco in Focus
Headquartered in Miami, Watsco (WSO - Free Report) is a Construction stock that has seen a price change of 3.4% so far this year. Currently paying a dividend of $1.45 per share, the company has a dividend yield of 3.3%. In comparison, the Building Products - Air Conditioner and Heating industry's yield is 0.71%, while the S&P 500's yield is 1.77%.
In terms of dividend growth, the company's current annualized dividend of $5.80 is up 26.1% from last year. Watsco has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 35.27%. 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. Watsco's current payout ratio is 97%, meaning it paid out 97% of its trailing 12-month EPS as dividend.
WSO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $6.67 per share, which represents a year-over-year growth rate of 21.72%.
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. It's important to keep in mind that not all companies provide 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. That said, they can take comfort from the fact that WSO is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).