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 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.
Rocky Brands in Focus
Headquartered in Nelsonville, Rocky Brands (RCKY - Free Report) is a Consumer Discretionary stock that has seen a price change of 7.62% so far this year. The footwear company is paying out a dividend of $0.14 per share at the moment, with a dividend yield of 2% compared to the Shoes and Retail Apparel industry's yield of 1.07% and the S&P 500's yield of 1.96%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.56 is up 19.1% from last year. Rocky Brands has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 4.40%. 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. Rocky Brands's current payout ratio is 28%. This means it paid out 28% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for RCKY for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.06 per share, which represents a year-over-year growth rate of 9.57%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, RCKY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).