Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
FNF Group in Focus
Based in Jacksonville, FNF Group (FNF) is in the Finance sector, and so far this year, shares have seen a price change of 30.41%. Currently paying a dividend of $0.31 per share, the company has a dividend yield of 3.02%. In comparison, the Insurance - Property and Casualty industry's yield is 1.35%, while the S&P 500's yield is 1.88%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.24 is up 3.3% from last year. In the past five-year period, FNF Group has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.85%. 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, FNF Group's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FNF expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.76 per share, which represents a year-over-year growth rate of 2.22%.
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that FNF is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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