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.
Consolidated Water in Focus
Consolidated Water (CWCO) is headquartered in Grand Cayman, and is in the Utilities sector. The stock has seen a price change of 9.52% since the start of the year. Currently paying a dividend of $0.09 per share, the company has a dividend yield of 2.46%. In comparison, the Utility - Water Supply industry's yield is 2.08%, while the S&P 500's yield is 1.81%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.34 is up 51.1% from last year. Over the last 5 years, Consolidated Water has increased its dividend 1 times on a year-over-year basis for an average annual increase of 1.36%. 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. Right now, Consolidated Water's payout ratio is 61%, which means it paid out 61% of its trailing 12-month EPS as dividend.
CWCO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $0.60 per share, representing a year-over-year earnings growth rate of 22.45%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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. That said, they can take comfort from the fact that CWCO is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Consolidated Water Co. Ltd. (CWCO) : Free Stock Analysis Report
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