Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.
Assurant in Focus
Assurant (AIZ - Free Report) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 6.46% since the start of the year. The insurer is paying out a dividend of $0.56 per share at the moment, with a dividend yield of 2.09% compared to the Insurance - Multi line industry's yield of 1.88% and the S&P 500's yield of 1.79%.
Looking at dividend growth, the company's current annualized dividend of $2.24 is up 4.2% from last year. In the past five-year period, Assurant has increased its dividend 5 times on a year-over-year basis for an average annual increase of 23.35%. 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. Assurant's current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AIZ expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $7.73 per share, which represents a year-over-year growth rate of 94.22%.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful 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 AIZ is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).