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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. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
BASF SE in Focus
Headquartered in Ludwigshafen, BASF SE (BASFY) is a Basic Materials stock that has seen a price change of 2.85% so far this year. Currently paying a dividend of $0.7 per share, the company has a dividend yield of 3.46%. In comparison, the Chemical - Diversified industry's yield is 1.28%, while the S&P 500's yield is 1.27%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.70 is up 4.9% from last year. Over the last 5 years, BASF SE has increased its dividend 3 times on a year-over-year basis for an average annual increase of 2.33%. 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. BASF SE's current payout ratio is 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BASFY expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $1.34 per share, representing a year-over-year earnings growth rate of 45.65%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BASFY 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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BASF SE (BASFY) : Free Stock Analysis Report
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