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Why Kaiser Aluminum (KALU) is a Great Dividend Stock Right Now
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.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.
Kaiser Aluminum in Focus
Kaiser Aluminum (KALU - Free Report) is headquartered in Foothill Ranch, and is in the Industrial Products sector. The stock has seen a price change of 2.96% since the start of the year. Currently paying a dividend of $0.6 per share, the company has a dividend yield of 2.61%. In comparison, the Metal Products - Procurement and Fabrication industry's yield is 0.42%, while the S&P 500's yield is 1.99%.
In terms of dividend growth, the company's current annualized dividend of $2.40 is up 9.1% from last year. In the past five-year period, Kaiser Aluminum has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.69%. 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. Right now, Kaiser's payout ratio is 36%, which means it paid out 36% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, KALU expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $7.14 per share, with earnings expected to increase 10.36% from the year ago period.
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.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, KALU 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).