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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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Eastman Chemical in Focus
Headquartered in Kingsport, Eastman Chemical (EMN) is a Basic Materials stock that has seen a price change of 13.02% so far this year. Currently paying a dividend of $0.69 per share, the company has a dividend yield of 2.44%. In comparison, the Chemical - Diversified industry's yield is 1.46%, while the S&P 500's yield is 1.4%.
Looking at dividend growth, the company's current annualized dividend of $2.76 is up 3.4% from last year. Eastman Chemical has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.24%. 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. Eastman Chemical's current payout ratio is 45%, meaning it paid out 45% of its trailing 12-month EPS as dividend.
EMN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $7.92 per share, with earnings expected to increase 28.78% 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.
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 have to be mindful 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 EMN 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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Eastman Chemical Company (EMN) : Free Stock Analysis Report
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