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 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.
Dick's Sporting Goods in Focus
Headquartered in Coraopolis, Dick's Sporting Goods (DKS) is a Retail-Wholesale stock that has seen a price change of 9.46% so far this year. Currently paying a dividend of $0.28 per share, the company has a dividend yield of 3.22%. In comparison, the Retail - Miscellaneous industry's yield is 0.31%, while the S&P 500's yield is 1.92%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.10 is up 22.2% from last year. Over the last 5 years, Dick's Sporting Goods has increased its dividend 5 times on a year-over-year basis for an average annual increase of 16.21%. 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. Dick's's current payout ratio is 34%, meaning it paid out 34% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for DKS for this fiscal year. The Zacks Consensus Estimate for 2019 is $3.33 per share, representing a year-over-year earnings growth rate of 2.78%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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, DKS presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
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