Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
Chesapeake Utilities in Focus
Based in Dover, Chesapeake Utilities (CPK) is in the Utilities sector, and so far this year, shares have seen a price change of -11.63%. The energy and utility company is paying out a dividend of $0.44 per share at the moment, with a dividend yield of 2.08% compared to the Utility - Gas Distribution industry's yield of 3.61% and the S&P 500's yield of 1.94%.
Looking at dividend growth, the company's current annualized dividend of $1.76 is up 11% from last year. Over the last 5 years, Chesapeake Utilities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.82%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Chesapeake Utilities's payout ratio is 44%, which means it paid out 44% of its trailing 12-month EPS as dividend.
CPK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $4.01 per share, with earnings expected to increase 9.56% from the year ago period.
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. 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, CPK 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Chesapeake Utilities Corporation (CPK) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research