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.
Dick's Sporting Goods in Focus
Headquartered in Coraopolis, Dick's Sporting Goods (DKS - Free Report) is a Retail-Wholesale stock that has seen a price change of 12.11% so far this year. Currently paying a dividend of $0.22 per share, the company has a dividend yield of 3.14%. In comparison, the Retail - Miscellaneous industry's yield is 0.18%, while the S&P 500's yield is 1.97%.
Looking at dividend growth, the company's current annualized dividend of $1.10 is up 22.2% from last year. In the past five-year period, Dick's Sporting Goods has increased its dividend 4 times on a year-over-year basis for an average annual increase of 13.30%. 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. Dick's's current payout ratio is 26%. This means it paid out 26% of its trailing 12-month EPS as dividend.
DKS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.31 per share, with earnings expected to increase 2.16% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, DKS 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).