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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Eaton Vance in Focus
Eaton Vance (EV - Free Report) is headquartered in Boston, and is in the Finance sector. The stock has seen a price change of 15.92% since the start of the year. The investment manager is paying out a dividend of $0.35 per share at the moment, with a dividend yield of 3.43% compared to the Financial - Investment Management industry's yield of 2.94% and the S&P 500's yield of 1.92%.
In terms of dividend growth, the company's current annualized dividend of $1.40 is up 9.4% from last year. Over the last 5 years, Eaton Vance has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.69%. 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. Eaton Vance's current payout ratio is 43%. This means it paid out 43% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for EV for this fiscal year. The Zacks Consensus Estimate for 2019 is $3.36 per share, with earnings expected to increase 4.67% 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.
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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EV presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).