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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
IdaCorp in Focus
Based in Boise, IdaCorp (IDA) is in the Utilities sector, and so far this year, shares have seen a price change of 9.29%. The utility company is paying out a dividend of $0.71 per share at the moment, with a dividend yield of 2.71% compared to the Utility - Electric Power industry's yield of 3.32% and the S&P 500's yield of 1.35%.
In terms of dividend growth, the company's current annualized dividend of $2.84 is up 4.4% from last year. IdaCorp has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.33%. 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. IdaCorp's current payout ratio is 56%. This means it paid out 56% of its trailing 12-month EPS as dividend.
IDA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $4.85 per share, with earnings expected to increase 3.41% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, IDA 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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IDACORP, Inc. (IDA) : Free Stock Analysis Report
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