Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 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.
HeidelbergCement (DE:HEIG) in Focus
HeidelbergCement (HDELY) is headquartered in Heidelberg, and is in the Construction sector. The stock has seen a price change of 24.82% since the start of the year. The company is currently shelling out a dividend of $0.3 per share, with a dividend yield of 2%. This compares to the Building Products - Concrete and Aggregates industry's yield of 0.23% and the S&P 500's yield of 1.87%.
Looking at dividend growth, the company's current annualized dividend of $0.30 is up 3.4% from last year. HeidelbergCement has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 29.84%. 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. HeidelbergCement's current payout ratio is 21%, meaning it paid out 21% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HDELY expects solid earnings growth. 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. It's important to keep in mind that not all companies provide 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. With that in mind, HDELY is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
HeidelbergCement AG (HDELY): Free Stock Analysis Report
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