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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. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Whirlpool in Focus
Whirlpool (WHR) is headquartered in Benton Harbor, and is in the Consumer Discretionary sector. The stock has seen a price change of 7.5% since the start of the year. Currently paying a dividend of $1.25 per share, the company has a dividend yield of 2.58%. In comparison, the Household Appliances industry's yield is 1.08%, while the S&P 500's yield is 1.4%.
Taking a look at the company's dividend growth, its current annualized dividend of $5 is up 3.1% from last year. Over the last 5 years, Whirlpool has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.63%. 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, Whirlpool's payout ratio is 27%, which means it paid out 27% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, WHR expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $20.19 per share, representing a year-over-year earnings growth rate of 8.84%.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, WHR 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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Whirlpool Corporation (WHR) : Free Stock Analysis Report
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