Primo (PRMW) Could Be a Great Choice
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.
Primo in Focus
Headquartered in Tampa, Primo (PRMW) is a Utilities stock that has seen a price change of -17.76% so far this year. The maker of pure-play water solutions is paying out a dividend of $0.08 per share at the moment, with a dividend yield of 2.5% compared to the Utility - Water Supply industry's yield of 2% and the S&P 500's yield of 1.66%.
In terms of dividend growth, the company's current annualized dividend of $0.32 is up 14.3% from last year. Primo has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 4.33%. 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. Primo's current payout ratio is 54%. This means it paid out 54% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PRMW for this fiscal year. The Zacks Consensus Estimate for 2023 is $0.79 per share, with earnings expected to increase 17.91% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that PRMW 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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Primo Water Corporation (PRMW) : Free Stock Analysis Report
