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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Canadian National in Focus
Based in Montreal, Canadian National (CNI) is in the Transportation sector, and so far this year, shares have seen a price change of -9.57%. Currently paying a dividend of $0.56 per share, the company has a dividend yield of 2.01%. In comparison, the Transportation - Rail industry's yield is 1.32%, while the S&P 500's yield is 1.83%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.23 is up 13.5% from last year. Canadian National has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 12.03%. 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. CN's current payout ratio is 45%. This means it paid out 45% of its trailing 12-month EPS as dividend.
CNI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $5.78 per share, representing a year-over-year earnings growth rate of 21.94%.
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CNI 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).
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Canadian National Railway Company (CNI) : Free Stock Analysis Report
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