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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Herman Miller in Focus
Herman Miller (MLHR - Free Report) is headquartered in Zeeland, and is in the Business Services sector. The stock has seen a price change of 12.3% since the start of the year. The furniture maker is paying out a dividend of $0.2 per share at the moment, with a dividend yield of 2.33% compared to the Business - Office Products industry's yield of 2.89% and the S&P 500's yield of 1.99%.
In terms of dividend growth, the company's current annualized dividend of $0.79 is up 9.7% from last year. In the past five-year period, Herman Miller has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.46%. 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. Herman Miller's current payout ratio is 30%. This means it paid out 30% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for MLHR for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.76 per share, with earnings expected to increase 20% 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. However, not all companies offer 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MLHR 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).