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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Whirlpool in Focus
Based in Benton Harbor, Whirlpool (WHR) is in the Consumer Discretionary sector, and so far this year, shares have seen a price change of 4.45%. Currently paying a dividend of $1.2 per share, the company has a dividend yield of 3.11%. In comparison, the Household Appliances industry's yield is 1.19%, while the S&P 500's yield is 1.77%.
Looking at dividend growth, the company's current annualized dividend of $4.80 is up 1.1% from last year. Whirlpool has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 8.46%. 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. Whirlpool's current payout ratio is 30%, meaning it paid out 30% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, WHR expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $16.29 per share, which represents a year-over-year growth rate of 1.81%.
Bottom Line
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.
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 WHR is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Whirlpool Corporation (NYSE:WHR): Free Stock Analysis Report
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