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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. However, 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Kohl's in Focus
Kohl's (KSS) is headquartered in Menomonee Falls, and is in the Retail-Wholesale sector. The stock has seen a price change of 5.43% since the start of the year. The department store operator is paying out a dividend of $0.67 per share at the moment, with a dividend yield of 3.83% compared to the Retail - Regional Department Stores industry's yield of 0.99% and the S&P 500's yield of 1.98%.
In terms of dividend growth, the company's current annualized dividend of $2.68 is up 9.8% from last year. Over the last 5 years, Kohl's has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.83%. 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. Kohl's's current payout ratio is 43%. This means it paid out 43% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for KSS for this fiscal year. The Zacks Consensus Estimate for 2019 is $5.99 per share, representing a year-over-year earnings growth rate of 6.96%.
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.
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. 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 KSS 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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Kohl's Corporation (KSS) : Free Stock Analysis Report
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