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Why Carter's (CRI) is a Great Dividend Stock Right Now

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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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Carter's in Focus

Carter's (CRI - Free Report) is headquartered in Atlanta, and is in the Consumer Discretionary sector. The stock has seen a price change of 7.12% since the start of the year. The maker of children's apparel and accessories is currently shelling out a dividend of $0.5 per share, with a dividend yield of 2.29%. This compares to the Shoes and Retail Apparel industry's yield of 1.02% and the S&P 500's yield of 1.9%.

Taking a look at the company's dividend growth, its current annualized dividend of $2 is up 11.1% from last year. In the past five-year period, Carter's has increased its dividend 5 times on a year-over-year basis for an average annual increase of 23.81%. 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, Carter's's payout ratio is 32%, which means it paid out 32% of its trailing 12-month EPS as dividend.

CRI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $6.64 per share, with earnings expected to increase 5.56% from the year ago period.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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 CRI is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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