All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
PNM Resources in Focus
PNM Resources (PNM) is headquartered in Albuquerque, and is in the Utilities sector. The stock has seen a price change of 15.21% since the start of the year. Currently paying a dividend of $0.29 per share, the company has a dividend yield of 2.45%. In comparison, the Utility - Electric Power industry's yield is 2.96%, while the S&P 500's yield is 1.94%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.16 is up 9.4% from last year. PNM Resources has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.66%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, PNM Resources's payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PNM for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.16 per share, with earnings expected to increase 8% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, PNM presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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PNM Resources, Inc. (Holding Co.) (PNM) : Free Stock Analysis Report
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