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.
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 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 -35% since the start of the year. The footwear company is currently shelling out a dividend of $0.14 per share, with a dividend yield of 2.93%. This compares to the Shoes and Retail Apparel industry's yield of 1.12% and the S&P 500's yield of 2.28%.
In terms of dividend growth, the company's current annualized dividend of $0.56 is up 3.7% from last year. In the past five-year period, Rocky Brands has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.63%. 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, Rocky Brands's payout ratio is 25%, which means 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, with earnings expected to increase 1.32% 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. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that RCKY is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).