All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
Worthington Industries in Focus
Worthington Industries (WOR - Free Report) is headquartered in Columbus, and is in the Industrial Products sector. The stock has seen a price change of 12.46% since the start of the year. The metal manufacturer is paying out a dividend of $0.23 per share at the moment, with a dividend yield of 2.35% compared to the Metal Products - Procurement and Fabrication industry's yield of 0.72% and the S&P 500's yield of 1.88%.
Looking at dividend growth, the company's current annualized dividend of $0.92 is up 2.2% from last year. In the past five-year period, Worthington Industries has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.36%. 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. Worthington's current payout ratio is 32%. This means it paid out 32% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, WOR expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.28 per share, with earnings expected to increase 18.41% 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.
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. That said, they can take comfort from the fact that WOR is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).