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.
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.
Kforce in Focus
Headquartered in Tampa, Kforce (KFRC) is a Business Services stock that has seen a price change of 12.97% so far this year. The staffing company is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 2.06% compared to the Staffing Firms industry's yield of 1.27% and the S&P 500's yield of 1.88%.
Looking at dividend growth, the company's current annualized dividend of $0.72 is up 20% from last year. In the past five-year period, Kforce has increased its dividend 3 times on a year-over-year basis for an average annual increase of 10.38%. 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. Right now, Kforce's payout ratio is 31%, which means it paid out 31% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, KFRC expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.54 per share, representing a year-over-year earnings growth rate of 10.43%.
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, KFRC 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Kforce, Inc. (KFRC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research