Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Carter's in Focus
Headquartered in Atlanta, Carter's (CRI) is a Consumer Discretionary stock that has seen a price change of 9.25% so far this year. Currently paying a dividend of $0.5 per share, the company has a dividend yield of 2.24%. In comparison, the Shoes and Retail Apparel industry's yield is 1.04%, while the S&P 500's yield is 1.99%.
Looking at dividend growth, the company's current annualized dividend of $2 is up 11.1% from last year. Carter's has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 24.32%. 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. Carter's's current payout ratio is 33%. This means it paid out 33% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CRI for this fiscal year. The Zacks Consensus Estimate for 2019 is $6.64 per share, representing a year-over-year earnings growth rate of 5.56%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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, CRI 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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Carter's, Inc. (CRI) : Free Stock Analysis Report
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