Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
Albemarle in Focus
Headquartered in Charlotte, Albemarle (ALB - Free Report) is a Basic Materials stock that has seen a price change of -5.83% so far this year. Currently paying a dividend of $0.37 per share, the company has a dividend yield of 2.03%. In comparison, the Chemical - Diversified industry's yield is 1.62%, while the S&P 500's yield is 1.94%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.47 is up 9.7% from last year. Albemarle has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.32%. 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. Albemarle's current payout ratio is 24%, meaning it paid out 24% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ALB for this fiscal year. The Zacks Consensus Estimate for 2019 is $6.17 per share, which represents a year-over-year growth rate of 12.59%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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, ALB 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).