All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
MetLife in Focus
MetLife (MET - Free Report) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 8.55% since the start of the year. The insurer is paying out a dividend of $0.42 per share at the moment, with a dividend yield of 3.77% compared to the Insurance - Multi line industry's yield of 2.18% and the S&P 500's yield of 1.96%.
Looking at dividend growth, the company's current annualized dividend of $1.68 is up 1.2% from last year. Over the last 5 years, MetLife has increased its dividend 4 times on a year-over-year basis for an average annual increase of 5.76%. 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. MetLife's current payout ratio is 31%, meaning it paid out 31% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, MET expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $5.48 per share, which represents a year-over-year growth rate of 1.67%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, MET is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).