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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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.
Reinsurance Group in Focus
Based in Chesterfield, Reinsurance Group (RGA) is in the Finance sector, and so far this year, shares have seen a price change of 1.53%. Currently paying a dividend of $0.73 per share, the company has a dividend yield of 2.48%. In comparison, the Insurance - Life Insurance industry's yield is 0.58%, while the S&P 500's yield is 1.39%.
In terms of dividend growth, the company's current annualized dividend of $2.92 is up 4.3% from last year. In the past five-year period, Reinsurance Group has increased its dividend 4 times on a year-over-year basis for an average annual increase of 14.49%. 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. Right now, Reinsurance Group's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for RGA for this fiscal year. The Zacks Consensus Estimate for 2021 is $9.48 per share, representing a year-over-year earnings growth rate of 25.73%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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. 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 RGA is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report
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