Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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.
NTT Docomo in Focus
Based in Tokyo, NTT Docomo (DCMYY) is in the Computer and Technology sector, and so far this year, shares have seen a price change of 25.53%. The mobile phone operator is currently shelling out a dividend of $0.49 per share, with a dividend yield of 3.52%. This compares to the Wireless Non-US industry's yield of 2.68% and the S&P 500's yield of 1.8%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.98 is up 31.9% from last year. NTT Docomo has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 14.07%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, NTT Docomo's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.
DCMYY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $1.79 per share, with earnings expected to increase 5.92% 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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, DCMYY 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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NTT DOCOMO, Inc (DCMYY) : Free Stock Analysis Report
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