Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.
FNF Group in Focus
Based in Jacksonville, FNF Group (FNF) is in the Finance sector, and so far this year, shares have seen a price change of 43.42%. The provider of title insurance and mortgage services is paying out a dividend of $0.31 per share at the moment, with a dividend yield of 2.75% compared to the Insurance - Property and Casualty industry's yield of 1.03% and the S&P 500's yield of 1.91%.
Looking at dividend growth, the company's current annualized dividend of $1.24 is up 3.3% from last year. In the past five-year period, FNF Group has increased its dividend 4 times on a year-over-year basis for an average annual increase of 13.29%. 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, FNF Group's payout ratio is 45%, which means it paid out 45% of its trailing 12-month EPS as dividend.
FNF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.89 per share, with earnings expected to increase 7.04% from the year ago period.
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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FNF presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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