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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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
CMS Energy in Focus
Based in Jackson, CMS Energy (CMS) is in the Utilities sector, and so far this year, shares have seen a price change of 4.47%. Currently paying a dividend of $0.44 per share, the company has a dividend yield of 2.73%. In comparison, the Utility - Electric Power industry's yield is 3.15%, while the S&P 500's yield is 1.29%.
In terms of dividend growth, the company's current annualized dividend of $1.74 is up 6.7% from last year. CMS Energy has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.11%. 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, CMS Energy's payout ratio is 57%, which means it paid out 57% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CMS expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.88 per share, which represents a year-over-year growth rate of 7.87%.
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.
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, CMS 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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CMS Energy Corporation (CMS) : Free Stock Analysis Report
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