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.
Universal Truckload Services in Focus
Universal Truckload Services (ULH - Free Report) is headquartered in Warren, and is in the Transportation sector. The stock has seen a price change of 11.44% since the start of the year. The trucking and logistics company is paying out a dividend of $0.1 per share at the moment, with a dividend yield of 2.08% compared to the Transportation - Truck industry's yield of 0.41% and the S&P 500's yield of 1.99%.
Looking at dividend growth, the company's current annualized dividend of $0.42 is up 9.1% from last year. Universal Truckload Services has increased its dividend 1 times on a year-over-year basis over the last 5 years for an average annual increase of 9.58%. 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, Universal Truckload's payout ratio is 18%, which means it paid out 18% of its trailing 12-month EPS as dividend.
ULH is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.55 per share, which represents a year-over-year growth rate of 22.60%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, ULH 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).