Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.
Synnex in Focus
Headquartered in Fremont, Synnex (SNX - Free Report) is a Computer and Technology stock that has seen a price change of -42.23% so far this year. The high-tech contractor is currently shelling out a dividend of $0.4 per share, with a dividend yield of 2.15%. This compares to the Business - Software Services industry's yield of 0.26% and the S&P 500's yield of 2.82%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.60 is up 6.7% from last year. Over the last 5 years, Synnex has increased its dividend 5 times on a year-over-year basis for an average annual increase of 27.79%. 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. Right now, Synnex's payout ratio is 11%, which means it paid out 11% of its trailing 12-month EPS as dividend.
SNX is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $13.97 per share, representing a year-over-year earnings growth rate of 5.35%.
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.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, SNX 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).