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Eastman Chemical (EMN) is a Top Dividend Stock Right Now: Should You Buy?

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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.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Eastman Chemical in Focus

Based in Kingsport, Eastman Chemical (EMN) is in the Basic Materials sector, and so far this year, shares have seen a price change of -7.13%. Currently paying a dividend of $0.76 per share, the company has a dividend yield of 2.71%. In comparison, the Chemical - Diversified industry's yield is 1.6%, while the S&P 500's yield is 1.53%.

Looking at dividend growth, the company's current annualized dividend of $3.04 is up 7.4% from last year. Eastman Chemical has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.93%. 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, Eastman Chemical's payout ratio is 35%, which means it paid out 35% of its trailing 12-month EPS as dividend.

EMN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $9.80 per share, which represents a year-over-year growth rate of 10.73%.

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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, EMN 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).


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