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.
Eaton (NYSE:ETN) Vance in Focus
Eaton Vance (EV) is headquartered in Boston, and is in the Finance sector. The stock has seen a price change of 35.1% since the start of the year. The investment manager is currently shelling out a dividend of $0.38 per share, with a dividend yield of 3.16%. This compares to the Financial - Investment Management industry's yield of 2.37% and the S&P 500's yield of 1.8%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.50 is up 17.2% from last year. Over the last 5 years, Eaton Vance has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.31%. 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. Eaton Vance's current payout ratio is 42%, meaning it paid out 42% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, EV expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.60 per share, representing a year-over-year earnings growth rate of 4.35%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, EV presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
Eaton Vance Corporation (EV): Free Stock Analysis Report
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