All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
PSEG in Focus
Headquartered in Newark, PSEG (PEG) is a Utilities stock that has seen a price change of 15.31% so far this year. Currently paying a dividend of $0.47 per share, the company has a dividend yield of 3.13%. In comparison, the Utility - Electric Power industry's yield is 2.89%, while the S&P 500's yield is 1.88%.
Looking at dividend growth, the company's current annualized dividend of $1.88 is up 4.4% from last year. In the past five-year period, PSEG has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.01%. 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. PSEG's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
PEG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.28 per share, which represents a year-over-year growth rate of 5.13%.
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.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, PEG 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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Public Service Enterprise Group Incorporated (PEG) : Free Stock Analysis Report
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