All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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.
Qualcomm in Focus
Headquartered in San Diego, Qualcomm (QCOM) is a Computer and Technology stock that has seen a price change of -10.68% so far this year. Currently paying a dividend of $1.24 per share, the company has a dividend yield of 4.88%. In comparison, the Wireless Equipment industry's yield is 0.4%, while the S&P 500's yield is 1.95%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.48 is up 4.2% from last year. Over the last 5 years, Qualcomm has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.83%. 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. Qualcomm's current payout ratio is 73%. This means it paid out 73% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for QCOM for this fiscal year. The Zacks Consensus Estimate for 2019 is $3.87 per share, which represents a year-over-year growth rate of 4.88%.
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.
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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, QCOM 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research