All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
Virtus Investment Partners in Focus
Based in Hartford, Virtus Investment Partners (VRTS - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 4.23%. The asset management company is currently shelling out a dividend of $0.67 per share, with a dividend yield of 2.11%. This compares to the Financial - Investment Management industry's yield of 2.28% and the S&P 500's yield of 1.82%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.68 is up 15.5% from last year. Over the last 5 years, Virtus Investment Partners has increased its dividend 2 times on a year-over-year basis for an average annual increase of 5.82%. 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. Virtus's current payout ratio is 18%, meaning it paid out 18% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for VRTS for this fiscal year. The Zacks Consensus Estimate for 2020 is $16.49 per share, with earnings expected to increase 11.42% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that VRTS is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).