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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
TOTAL S.A. In Focus
Based in Paris, TOTAL S.A. (TOT) is in the Oils-Energy sector, and so far this year, shares have seen a price change of -20.6%. The company is paying out a dividend of $0.6 per share at the moment, with a dividend yield of 5.51% compared to the Oil and Gas - Integrated - International industry's yield of 2.7% and the S&P 500's yield of 1.92%.
Looking at dividend growth, the company's current annualized dividend of $2.42 is up 35.9% from last year. In the past five-year period, TOTAL S.A. has increased its dividend 1 times on a year-over-year basis for an average annual increase of 1.44%. 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. TOTAL S.A.'s current payout ratio is 54%. This means it paid out 54% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for TOT for this fiscal year. The Zacks Consensus Estimate for 2020 is $5.10 per share, representing a year-over-year earnings growth rate of 16.44%.
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. 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, TOT 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).