Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
Ahold NV in Focus
Ahold NV (ADRNY - Free Report) is headquartered in Zaandam, and is in the Consumer Staples sector. The stock has seen a price change of -0.12% since the start of the year. The company is paying out a dividend of $0.66 per share at the moment, with a dividend yield of 2.64% compared to the Consumer Products - Staples industry's yield of 0.73% and the S&P 500's yield of 1.9%.
Looking at dividend growth, the company's current annualized dividend of $0.66 is up 1.1% from last year. In the past five-year period, Ahold NV has increased its dividend 3 times on a year-over-year basis for an average annual increase of 3.59%. 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. Ahold NV's current payout ratio is 33%. This means it paid out 33% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ADRNY expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $1.90 per share, which represents a year-over-year growth rate of 1.60%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that ADRNY is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).