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.
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.
Boeing in Focus
Headquartered in Chicago, Boeing (BA - Free Report) is an Aerospace stock that has seen a price change of 17.72% so far this year. Currently paying a dividend of $2.06 per share, the company has a dividend yield of 2.17%. In comparison, the Aerospace - Defense industry's yield is 0.92%, while the S&P 500's yield is 1.89%.
Looking at dividend growth, the company's current annualized dividend of $8.22 is up 20.2% from last year. Over the last 5 years, Boeing has increased its dividend 5 times on a year-over-year basis for an average annual increase of 23.91%. 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. Boeing's current payout ratio is 43%. This means it paid out 43% of its trailing 12-month EPS as dividend.
BA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $17.07 per share, with earnings expected to increase 6.62% 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.
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, BA 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).