All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
Crane in Focus
Headquartered in Stamford, Crane (CR) is a Conglomerates stock that has seen a price change of 4.6% so far this year. Currently paying a dividend of $0.39 per share, the company has a dividend yield of 2.07%. In comparison, the Diversified Operations industry's yield is 1.62%, while the S&P 500's yield is 1.92%.
Looking at dividend growth, the company's current annualized dividend of $1.56 is up 11.4% from last year. Over the last 5 years, Crane has increased its dividend 3 times on a year-over-year basis for an average annual increase of 2.69%. 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. Crane's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
CR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $6.39 per share, which represents a year-over-year growth rate of 6.68%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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, CR 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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Crane Company (CR) : Free Stock Analysis Report
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