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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Manulife Financial in Focus
Manulife Financial (MFC - Free Report) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of 18.96% since the start of the year. Currently paying a dividend of $0.19 per share, the company has a dividend yield of 4.51%. In comparison, the Insurance - Life Insurance industry's yield is 0.68%, while the S&P 500's yield is 1.93%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.76 is up 7.6% from last year. Manulife Financial has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 8.74%. 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. Right now, Manulife's payout ratio is 36%, which means it paid out 36% of its trailing 12-month EPS as dividend.
MFC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.19 per share, with earnings expected to increase 3.79% 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. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, MFC 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).