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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Manulife Financial in Focus
Manulife Financial (MFC - Free Report) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of 31.22% since the start of the year. The financial services company is paying out a dividend of $0.19 per share at the moment, with a dividend yield of 4.07% compared to the Insurance - Life Insurance industry's yield of 0.67% and the S&P 500's yield of 1.87%.
Looking at dividend growth, the company's current annualized dividend of $0.76 is up 7.6% from last year. In the past five-year period, Manulife Financial has increased its dividend 4 times on a year-over-year basis for an average annual increase of 10.12%. 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. Manulife's current payout ratio is 34%, meaning it paid out 34% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for MFC for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.23 per share, which represents a year-over-year growth rate of 5.69%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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, MFC 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).