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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Spartan Stores in Focus
Spartan Stores (SPTN) is headquartered in Grand Rapids, and is in the Retail-Wholesale sector. The stock has seen a price change of 32.53% since the start of the year. Currently paying a dividend of $0.21 per share, the company has a dividend yield of 2.46%. In comparison, the Food - Natural Foods Products industry's yield is 0.69%, while the S&P 500's yield is 1.45%.
In terms of dividend growth, the company's current annualized dividend of $0.84 is up 5% from last year. Over the last 5 years, Spartan Stores has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.44%. 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. Spartan Stores's current payout ratio is 47%. This means it paid out 47% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SPTN for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.12 per share, representing a year-over-year earnings growth rate of 24.71%.
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. 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 SPTN 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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SpartanNash Company (SPTN) : Free Stock Analysis Report
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