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.
Mondelez in Focus
Mondelez (MDLZ - Free Report) is headquartered in Deerfield, and is in the Consumer Staples sector. The stock has seen a price change of 38.2% since the start of the year. Currently paying a dividend of $0.28 per share, the company has a dividend yield of 2.06%. In comparison, the Food - Miscellaneous industry's yield is 0.1%, while the S&P 500's yield is 1.9%.
In terms of dividend growth, the company's current annualized dividend of $1.14 is up 18.8% from last year. In the past five-year period, Mondelez has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.96%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Mondelez's current payout ratio is 42%, meaning it paid out 42% of its trailing 12-month EPS as dividend.
MDLZ is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.48 per share, representing a year-over-year earnings growth rate of 2.06%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MDLZ 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).