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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
KLA-Tencor in Focus
Headquartered in Milpitas, KLA-Tencor (KLAC) is a Computer and Technology stock that has seen a price change of 37.93% so far this year. Currently paying a dividend of $0.75 per share, the company has a dividend yield of 2.43%. In comparison, the Semiconductor Equipment - Wafer Fabrication industry's yield is 1.86%, while the S&P 500's yield is 1.89%.
In terms of dividend growth, the company's current annualized dividend of $3 is up 19% from last year. In the past five-year period, KLA-Tencor has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.15%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, KLA-Tencor's payout ratio is 33%, which means it paid out 33% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for KLAC for this fiscal year. The Zacks Consensus Estimate for 2019 is $8.43 per share, which represents a year-over-year growth rate of 5.38%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. With that in mind, KLAC 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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KLA-Tencor Corporation (KLAC) : Free Stock Analysis Report
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