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.
PGE in Focus
PGE (POR - Free Report) is headquartered in Portland, and is in the Utilities sector. The stock has seen a price change of 16.2% since the start of the year. Currently paying a dividend of $0.36 per share, the company has a dividend yield of 2.72%. In comparison, the Utility - Electric Power industry's yield is 2.98%, while the S&P 500's yield is 1.95%.
Looking at dividend growth, the company's current annualized dividend of $1.45 is up 1.5% from last year. In the past five-year period, PGE has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.37%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. PGE's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for POR for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.45 per share, which represents a year-over-year growth rate of 3.38%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. That said, they can take comfort from the fact that POR is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).