All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Timken in Focus
Timken (TKR) is headquartered in North Canton, and is in the Industrial Products sector. The stock has seen a price change of 38.77% since the start of the year. Currently paying a dividend of $0.28 per share, the company has a dividend yield of 2.16%. In comparison, the Metal Products - Procurement and Fabrication industry's yield is 0.42%, while the S&P 500's yield is 1.88%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.12 is up 0.9% from last year. Timken has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 2.58%. 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, Timken's payout ratio is 27%, which means it paid out 27% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, TKR expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $4.81 per share, representing a year-over-year earnings growth rate of 15.07%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that TKR is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Timken Company (The) (TKR) : Free Stock Analysis Report
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