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.
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 -1.91% since the start of the year. The investment manager is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 3.28% compared to the Financial - Investment Management industry's yield of 2.22% and the S&P 500's yield of 1.81%.
In terms of dividend growth, the company's current annualized dividend of $1.50 is up 5.3% 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%. 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. Right now, Eaton Vance's payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, EV expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $3.59 per share, which represents a year-over-year growth rate of 4.06%.
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.
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. 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 EV is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Eaton Vance Corporation (EV): Free Stock Analysis Report
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