All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
DTE Energy in Focus
DTE Energy (DTE) is headquartered in Detroit, and is in the Utilities sector. The stock has seen a price change of 3.51% since the start of the year. Currently paying a dividend of $0.88 per share, the company has a dividend yield of 3.12%. In comparison, the Utility - Electric Power industry's yield is 3.24%, while the S&P 500's yield is 1.78%.
In terms of dividend growth, the company's current annualized dividend of $3.53 is up 5.2% from last year. DTE Energy has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 7.35%. 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, DTE Energy's payout ratio is 59%, which means it paid out 59% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for DTE for this fiscal year. The Zacks Consensus Estimate for 2018 is $6.16 per share, which represents a year-over-year growth rate of 10.20%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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, DTE 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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DTE Energy Company (DTE) : Free Stock Analysis Report
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