Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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
Assurant (AIZ - Free Report) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 33.53% since the start of the year. Currently paying a dividend of $0.6 per share, the company has a dividend yield of 2.01%. In comparison, the Insurance - Multi line industry's yield is 2.38%, while the S&P 500's yield is 1.97%.
Taking a look at the company's dividend growth, its 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. Assurant's current payout ratio is 38%. This means it paid out 38% of its trailing 12-month EPS as dividend.
AIZ is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $8.76 per share, representing a year-over-year earnings growth rate of 51.03%.
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. 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, AIZ 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).