McGrath (MGRC) Could Be a Great Choice
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
McGrath in Focus
Headquartered in Livermore, McGrath (MGRC) is a Finance stock that has seen a price change of -3.16% so far this year. The business-to-business rental company is currently shelling out a dividend of $0.46 per share, with a dividend yield of 2.34%. This compares to the Financial - Leasing Companies industry's yield of 1.2% and the S&P 500's yield of 1.71%.
In terms of dividend growth, the company's current annualized dividend of $1.82 is up 5.5% from last year. Over the last 5 years, McGrath has increased its dividend 4 times on a year-over-year basis for an average annual increase of 12.68%. 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. McGrath's current payout ratio is 47%. This means it paid out 47% of its trailing 12-month EPS as dividend.
MGRC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $4.06 per share, representing a year-over-year earnings growth rate of 10.93%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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, MGRC 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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