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 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.
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 17.34% since the start of the year. Currently paying a dividend of $0.36 per share, the company has a dividend yield of 2.7%. In comparison, the Utility - Electric Power industry's yield is 2.93%, while the S&P 500's yield is 2.04%.
In terms of dividend growth, the company's current annualized dividend of $1.45 is up 1.5% from last year. PGE has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.37%. 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, PGE's payout ratio is 59%, which 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%.
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.
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, POR 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).