Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Everest Re in Focus
Everest Re (RE) is headquartered in Hamilton, and is in the Finance sector. The stock has seen a price change of 1.46% since the start of the year. Currently paying a dividend of $3.2 per share, the company has a dividend yield of 2.37%. In comparison, the Insurance - Property and Casualty industry's yield is 1.11%, while the S&P 500's yield is 1.61%.
Taking a look at the company's dividend growth, its current annualized dividend of $6.60 is up 6.5% from last year. In the past five-year period, Everest Re has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.50%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Everest Re's current payout ratio is 19%, meaning it paid out 19% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, RE expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $34.27 per share, which represents a year-over-year growth rate of 18.29%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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 RE is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Everest Re Group, Ltd. (RE) : Free Stock Analysis Report
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