Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Rocky Brands in Focus
Rocky Brands (RCKY - Free Report) is headquartered in Nelsonville, and is in the Consumer Discretionary sector. The stock has seen a price change of -41.59% since the start of the year. Currently paying a dividend of $0.14 per share, the company has a dividend yield of 3.26%. In comparison, the Shoes and Retail Apparel industry's yield is 1.18%, while the S&P 500's yield is 2.53%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.56 is up 3.7% from last year. Over the last 5 years, Rocky Brands has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.43%. 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. Rocky Brands's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
RCKY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $2.30 per share, which represents a year-over-year growth rate of 1.32%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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, RCKY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).