PSEG CEO says $400 million energy conservation investment is a 'triple win'
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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
PSEG in Focus
Based in Newark, PSEG (PEG) is in the Utilities sector, and so far this year, shares have seen a price change of 16.6%. The parent company of PSEG Power and Public Service Electric & Gas Co. Is currently shelling out a dividend of $0.47 per share, with a dividend yield of 3.1%. This compares to the Utility - Electric Power industry's yield of 2.96% and the S&P 500's yield of 1.94%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.88 is up 4.4% from last year. Over the last 5 years, PSEG has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.99%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, PSEG's payout ratio is 58%, which means it paid out 58% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PEG expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.27 per share, which represents a year-over-year growth rate of 4.81%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PEG 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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Public Service Enterprise Group Incorporated (PEG) : Free Stock Analysis Report
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