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 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.
Celanese in Focus
Based in Irving, Celanese (CE - Free Report) is in the Basic Materials sector, and so far this year, shares have seen a price change of -4.74%. Currently paying a dividend of $0.54 per share, the company has a dividend yield of 2.12%. In comparison, the Chemical - Specialty industry's yield is 0.35%, while the S&P 500's yield is 1.83%.
In terms of dividend growth, the company's current annualized dividend of $2.16 is up 24.1% from last year. Over the last 5 years, Celanese has increased its dividend 5 times on a year-over-year basis for an average annual increase of 24.08%. 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. Celanese's current payout ratio is 22%. This means it paid out 22% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CE expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $10.76 per share, with earnings expected to increase 43.28% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. With that in mind, CE presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).