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.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
NTT Docomo in Focus
NTT Docomo (DCMYY - Free Report) is headquartered in Tokyo, and is in the Computer and Technology sector. The stock has seen a price change of 23.35% since the start of the year. The mobile phone operator is paying out a dividend of $0.49 per share at the moment, with a dividend yield of 3.59% compared to the Wireless Non-US industry's yield of 2.59% and the S&P 500's yield of 1.82%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.98 is up 31.9% from last year. Over the last 5 years, NTT Docomo has increased its dividend 4 times on a year-over-year basis for an average annual increase of 12.39%. 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. NTT Docomo's current payout ratio is 46%. This means it paid out 46% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, DCMYY expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $1.79 per share, with earnings expected to increase 5.92% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, DCMYY 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).