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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.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Eaton in Focus
Based in Dublin, Eaton (ETN) is in the Industrial Products sector, and so far this year, shares have seen a price change of -13.96%. Currently paying a dividend of $0.81 per share, the company has a dividend yield of 2.18%. In comparison, the Manufacturing - Electronics industry's yield is 0.64%, while the S&P 500's yield is 1.65%.
In terms of dividend growth, the company's current annualized dividend of $3.24 is up 6.6% from last year. Eaton has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.57%. 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, Eaton's payout ratio is 48%, which means it paid out 48% of its trailing 12-month EPS as dividend.
ETN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $7.48 per share, with earnings expected to increase 12.99% 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. 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, ETN 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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Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
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