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.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Robert Half in Focus
Headquartered in Menlo Park, Robert Half (RHI) is a Business Services stock that has seen a price change of -0.33% so far this year. Currently paying a dividend of $0.31 per share, the company has a dividend yield of 2.18%. In comparison, the Staffing Firms industry's yield is 1.25%, while the S&P 500's yield is 1.91%.
In terms of dividend growth, the company's current annualized dividend of $1.24 is up 10.7% from last year. Robert Half has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 11.49%. 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. Robert Half's current payout ratio is 33%. This means it paid out 33% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, RHI expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.98 per share, which represents a year-over-year growth rate of 10.25%.
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.
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. 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, RHI 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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Robert Half International Inc. (RHI) : Free Stock Analysis Report
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