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 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.
Kforce in Focus
Based in Tampa, Kforce (KFRC) is in the Business Services sector, and so far this year, shares have seen a price change of 13.03%. The staffing company is currently shelling out a dividend of $0.18 per share, with a dividend yield of 2.06%. This compares to the Staffing Firms industry's yield of 1.23% and the S&P 500's yield of 1.91%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.72 is up 20% from last year. Kforce has increased its dividend 3 times on a year-over-year basis over the last 5 years 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. Kforce's current payout ratio is 31%, meaning it paid out 31% of its trailing 12-month EPS as dividend.
KFRC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.38 per share, representing a year-over-year earnings growth rate of 3.48%.
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. 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.