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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
PSEG in Focus
Headquartered in Newark, PSEG (PEG) is a Utilities stock that has seen a price change of -7.76% so far this year. Currently paying a dividend of $0.49 per share, the company has a dividend yield of 3.6%. In comparison, the Utility - Electric Power industry's yield is 3.48%, while the S&P 500's yield is 1.77%.
In terms of dividend growth, the company's current annualized dividend of $1.96 is up 4.3% from last year. PSEG has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.77%. 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. Right now, PSEG's payout ratio is 57%, which means it paid out 57% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PEG for this fiscal year. The Zacks Consensus Estimate for 2020 is $3.35 per share, with earnings expected to increase 2.13% 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, PEG 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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Public Service Enterprise Group Incorporated (PEG) : Free Stock Analysis Report
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