Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Regal Beloit in Focus
Regal Beloit (RBC) is headquartered in Beloit, and is in the Industrial Products sector. The stock has seen a price change of -37.94% since the start of the year. The maker of controls for electric motors is currently shelling out a dividend of $0.3 per share, with a dividend yield of 2.26%. This compares to the Manufacturing - Electronics industry's yield of 0.47% and the S&P 500's yield of 2.82%.
Looking at dividend growth, the company's current annualized dividend of $1.20 is up 1.7% from last year. Over the last 5 years, Regal Beloit has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.91%. 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, Regal Beloit's payout ratio is 22%, which means it paid out 22% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for RBC for this fiscal year. The Zacks Consensus Estimate for 2020 is $5.82 per share, which represents a year-over-year growth rate of 6.01%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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 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 RBC 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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Regal Beloit Corporation (RBC) : Free Stock Analysis Report
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