Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
Assurant in Focus
Based in New York, Assurant (AIZ - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 33.56%. The insurer is currently shelling out a dividend of $0.6 per share, with a dividend yield of 2.01%. This compares to the Insurance - Multi line industry's yield of 2.38% and the S&P 500's yield of 1.91%.
In terms of dividend growth, the company's current annualized dividend of $2.40 is up 5.3% from last year. In the past five-year period, Assurant has increased its dividend 5 times on a year-over-year basis for an average annual increase of 19.05%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Assurant's payout ratio is 39%, which means it paid out 39% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AIZ expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $8.61 per share, with earnings expected to increase 48.45% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that AIZ is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).