Are You Looking for a High-Growth Dividend Stock?
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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
PNM Resources in Focus
PNM Resources (PNM) is headquartered in Albuquerque, and is in the Utilities sector. The stock has seen a price change of -6.09% since the start of the year. Currently paying a dividend of $0.37 per share, the company has a dividend yield of 3.21%. In comparison, the Utility - Electric Power industry's yield is 3.59%, while the S&P 500's yield is 1.66%.
Looking at dividend growth, the company's current annualized dividend of $1.47 is up 5.8% from last year. PNM Resources has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.67%. 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, PNM Resources's payout ratio is 54%, which means it paid out 54% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PNM expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $2.71 per share, which represents a year-over-year growth rate of 0.74%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that PNM is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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PNM Resources, Inc. (PNM) : Free Stock Analysis Report
