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.
Artesian Resources in Focus
Based in Newark, Artesian Resources (ARTNA) is in the Utilities sector, and so far this year, shares have seen a price change of -2.47%. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 2.75%. In comparison, the Utility - Water Supply industry's yield is 1.85%, while the S&P 500's yield is 1.93%.
Taking a look at the company's dividend growth, its current annualized dividend of $1 is up 1.6% from last year. Over the last 5 years, Artesian Resources has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3%. 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. Right now, Artesian Resources's payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.
ARTNA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $1.68 per share, which represents a year-over-year growth rate of 5%.
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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, ARTNA 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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