Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Eaton Vance in Focus
Eaton Vance (EV) is headquartered in Boston, and is in the Finance sector. The stock has seen a price change of 5.91% since the start of the year. The investment manager is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 3.03% compared to the Financial - Investment Management industry's yield of 2.21% and the S&P 500's yield of 1.75%.
Looking at dividend growth, the company's current annualized dividend of $1.50 is up 5.3% from last year. Over the last 5 years, Eaton Vance has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.94%. 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. Eaton Vance's current payout ratio is 43%, meaning it paid out 43% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, EV expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $3.59 per share, representing a year-over-year earnings growth rate of 4.06%.
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.
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. That said, they can take comfort from the fact that EV is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).