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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
Gatx in Focus
Headquartered in Chicago, Gatx (GATX) is a Transportation stock that has seen a price change of -8.81% so far this year. The equipment finance company is currently shelling out a dividend of $0.52 per share, with a dividend yield of 2.19%. This compares to the Transportation - Equipment and Leasing industry's yield of 1.46% and the S&P 500's yield of 1.67%.
In terms of dividend growth, the company's current annualized dividend of $2.08 is up 4% from last year. In the past five-year period, Gatx has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.46%. 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. Gatx's current payout ratio is 33%. This means it paid out 33% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for GATX for this fiscal year. The Zacks Consensus Estimate for 2022 is $5.83 per share, representing a year-over-year earnings growth rate of 15.22%.
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.
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. With that in mind, GATX 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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GATX Corporation (GATX) : Free Stock Analysis Report
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