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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
Matthews International in Focus
Matthews International (MATW) is headquartered in Pittsburgh, and is in the Consumer Staples sector. The stock has seen a price change of -42.52% since the start of the year. The casket and memorial manufacturer is currently shelling out a dividend of $0.21 per share, with a dividend yield of 3.83%. This compares to the Funeral Services industry's yield of 2.83% and the S&P 500's yield of 2.23%.
In terms of dividend growth, the company's current annualized dividend of $0.84 is up 5% from last year. Over the last 5 years, Matthews International has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.39%. 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. Matthews International's current payout ratio is 26%, meaning it paid out 26% of its trailing 12-month EPS as dividend.
MATW is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $3.42 per share, representing a year-over-year earnings growth rate of 3.32%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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. That said, they can take comfort from the fact that MATW is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Matthews International Corporation (MATW) : Free Stock Analysis Report
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