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.
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.
FNF Group in Focus
Headquartered in Jacksonville, FNF Group (FNF) is a Finance stock that has seen a price change of 24.36% so far this year. The provider of title insurance and mortgage services is paying out a dividend of $0.31 per share at the moment, with a dividend yield of 3.17% compared to the Insurance - Property and Casualty industry's yield of 1.53% and the S&P 500's yield of 1.96%.
Looking at dividend growth, the company's 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 14.04%. 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. FNF Group's current payout ratio is 46%. This 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 $2.74 per share, with earnings expected to increase 1.48% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FNF 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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