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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 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 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.
Sempra in Focus
Based in San Diego, Sempra (SRE) is in the Utilities sector, and so far this year, shares have seen a price change of 6.05%. Currently paying a dividend of $1.1 per share, the company has a dividend yield of 3.26%. In comparison, the Utility - Gas Distribution industry's yield is 2.92%, while the S&P 500's yield is 1.39%.
In terms of dividend growth, the company's current annualized dividend of $4.40 is up 5.3% from last year. Over the last 5 years, Sempra has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.23%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Sempra's current payout ratio is 56%. This means it paid out 56% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SRE for this fiscal year. The Zacks Consensus Estimate for 2021 is $8.15 per share, representing a year-over-year earnings growth rate of 1.49%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. 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, SRE 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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Sempra Energy (SRE) : Free Stock Analysis Report
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