All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Rocky Brands in Focus
Based in Nelsonville, Rocky Brands (RCKY - Free Report) is in the Consumer Discretionary sector, and so far this year, shares have seen a price change of 0.23%. Currently paying a dividend of $0.14 per share, the company has a dividend yield of 2.15%. In comparison, the Shoes and Retail Apparel industry's yield is 1.05%, while the S&P 500's yield is 1.94%.
In terms of dividend growth, the company's current annualized dividend of $0.56 is up 19.1% from last year. Over the last 5 years, Rocky Brands has increased its dividend 2 times on a year-over-year basis for an average annual increase of 3.57%. 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. Rocky Brands's current payout ratio is 25%. This means it paid out 25% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, RCKY expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2 per share, which represents a year-over-year growth rate of 6.38%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, RCKY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).