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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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.
Spartan Stores in Focus
Headquartered in Grand Rapids, Spartan Stores (SPTN) is a Retail-Wholesale stock that has seen a price change of 34.74% so far this year. Currently paying a dividend of $0.21 per share, the company has a dividend yield of 2.42%. In comparison, the Food - Natural Foods Products industry's yield is 0.94%, while the S&P 500's yield is 1.45%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.84 is up 5% from last year. In the past five-year period, Spartan Stores has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.44%. 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. Spartan Stores's current payout ratio is 47%. This means it paid out 47% of its trailing 12-month EPS as dividend.
SPTN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $2.12 per share, with earnings expected to increase 24.71% 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. 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, SPTN 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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SpartanNash Company (SPTN) : Free Stock Analysis Report
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