All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
FNF Group in Focus
Based in Jacksonville, FNF Group (FNF - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 38.49%. Currently paying a dividend of $0.31 per share, the company has a dividend yield of 2.85%. In comparison, the Insurance - Property and Casualty industry's yield is 1.21%, while the S&P 500's yield is 1.97%.
Looking at dividend growth, the company's current annualized dividend of $1.24 is up 3.3% from last year. Over the last 5 years, FNF Group has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.85%. 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, FNF Group's payout ratio is 45%, which means it paid out 45% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FNF expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.91 per share, representing a year-over-year earnings growth rate of 7.78%.
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, FNF 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).