Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Knoll in Focus
Knoll (KNL - Free Report) is headquartered in East Greenville, and is in the Business Services sector. The stock has seen a price change of 39.44% since the start of the year. The workplace furniture and textile maker is paying out a dividend of $0.17 per share at the moment, with a dividend yield of 2.96% compared to the Business - Office Products industry's yield of 3.07% and the S&P 500's yield of 1.91%.
In terms of dividend growth, the company's current annualized dividend of $0.68 is up 13.3% from last year. In the past five-year period, Knoll has increased its dividend 1 times on a year-over-year basis for an average annual increase of 5.80%. 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. Knoll's current payout ratio is 32%, meaning it paid out 32% of its trailing 12-month EPS as dividend.
KNL is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.03 per share, with earnings expected to increase 9.73% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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, KNL 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).