Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
HeidelbergCement (DE:HEIG) in Focus
Headquartered in Heidelberg, HeidelbergCement (HDELY) is a Construction stock that has seen a price change of 24.57% so far this year. The company is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 2% compared to the Building Products - Concrete and Aggregates industry's yield of 0.22% and the S&P 500's yield of 1.89%.
Looking at dividend growth, the company's current annualized dividend of $0.30 is up 3.4% from last year. In the past five-year period, HeidelbergCement has increased its dividend 4 times on a year-over-year basis for an average annual increase of 29.84%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. HeidelbergCement's current payout ratio is 21%. This means it paid out 21% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for HDELY for this fiscal year. The Zacks Consensus Estimate for 2019 is $1.46 per share, which represents a year-over-year growth rate of 5.80%.
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.
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 have to be mindful 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 HDELY is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
HeidelbergCement AG (HDELY): Free Stock Analysis Report
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