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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 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.
Eastman Chemical in Focus
Headquartered in Kingsport, Eastman Chemical (EMN) is a Basic Materials stock that has seen a price change of 12.44% so far this year. Currently paying a dividend of $0.69 per share, the company has a dividend yield of 2.45%. In comparison, the Chemical - Diversified industry's yield is 1.5%, while the S&P 500's yield is 1.36%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.76 is up 3.4% from last year. Eastman Chemical has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 8.46%. 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. Eastman Chemical's current payout ratio is 44%, meaning it paid out 44% of its trailing 12-month EPS as dividend.
EMN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $8.73 per share, representing a year-over-year earnings growth rate of 41.95%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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, EMN 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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Eastman Chemical Company (EMN) : Free Stock Analysis Report
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