All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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 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.
PGE in Focus
Headquartered in Portland, PGE (POR) is a Utilities stock that has seen a price change of 6.72% so far this year. Currently paying a dividend of $0.36 per share, the company has a dividend yield of 2.96%. In comparison, the Utility - Electric Power industry's yield is 2.94%, while the S&P 500's yield is 1.91%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.45 is up 1.5% from last year. PGE has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.42%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. PGE's current payout ratio is 58%. This means it paid out 58% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for POR for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.44 per share, with earnings expected to increase 2.95% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 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 POR is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Portland General Electric Company (NYSE:GE
Original post