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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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Cabot in Focus
Headquartered in Boston, Cabot (CBT) is a Basic Materials stock that has seen a price change of 31.85% so far this year. The chemical company is currently shelling out a dividend of $0.37 per share, with a dividend yield of 2%. This compares to the Chemical - Diversified industry's yield of 1.53% and the S&P 500's yield of 1.45%.
Looking at dividend growth, the company's current annualized dividend of $1.48 is up 5.7% from last year. Over the last 5 years, Cabot has increased its dividend 4 times on a year-over-year basis for an average annual increase of 3.46%. 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, Cabot's payout ratio is 29%, which means it paid out 29% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CBT expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $5.80 per share, which represents a year-over-year growth rate of 15.54%.
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CBT is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Cabot Corporation (CBT) : Free Stock Analysis Report
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