Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
Albemarle in Focus
Albemarle (ALB) is headquartered in Charlotte, and is in the Basic Materials sector. The stock has seen a price change of -13.33% since the start of the year. The specialty chemicals company is paying out a dividend of $0.37 per share at the moment, with a dividend yield of 2.2% compared to the Chemical - Diversified industry's yield of 1.76% and the S&P 500's yield of 1.99%.
Looking at dividend growth, the company's current annualized dividend of $1.47 is up 9.7% from last year. Over the last 5 years, Albemarle has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.32%. 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. Albemarle's current payout ratio is 27%, meaning it paid out 27% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ALB for this fiscal year. The Zacks Consensus Estimate for 2019 is $6.20 per share, representing a year-over-year earnings growth rate of 13.14%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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, ALB 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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Albemarle Corporation (ALB) : Free Stock Analysis Report
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