Why Delek US Holdings (DK) is a Great Dividend Stock Right Now
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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Delek US Holdings in Focus
Headquartered in Brentwood, Delek US Holdings (DK) is an Oils-Energy stock that has seen a price change of 1.12% so far this year. The refinery operator is paying out a dividend of $0.25 per share at the moment, with a dividend yield of 2.83% compared to the Oil and Gas - Refining and Marketing industry's yield of 2.21% and the S&P 500's yield of 2.02%.
In terms of dividend growth, the company's current annualized dividend of $1 is up 66.7% from last year. Delek US Holdings has increased its dividend 1 times on a year-over-year basis over the last 5 years for an average annual increase of 7.07%. 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, Delek US Holdings's payout ratio is 37%, which means it paid out 37% of its trailing 12-month EPS as dividend.
DK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $4.49 per share, with earnings expected to increase 256.35% from the year ago period.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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. 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, DK 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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