Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
MetLife in Focus
Headquartered in New York, MetLife (MET - Free Report) is a Finance stock that has seen a price change of 16.02% so far this year. The insurer is currently shelling out a dividend of $0.44 per share, with a dividend yield of 3.69%. This compares to the Insurance - Multi line industry's yield of 2.39% and the S&P 500's yield of 1.95%.
In terms of dividend growth, the company's current annualized dividend of $1.76 is up 6% from last year. MetLife has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 4.22%. 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. MetLife's current payout ratio is 30%, meaning it paid out 30% of its trailing 12-month EPS as dividend.
MET is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $5.61 per share, representing a year-over-year earnings growth rate of 4.08%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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. With that in mind, MET 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).