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.
Mondelez in Focus
Headquartered in Deerfield, Mondelez (MDLZ) is a Consumer Staples stock that has seen a price change of -6.52% so far this year. The maker of Oreo cookies, Cadbury chocolate and Trident gum is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 2.21% compared to the Food - Miscellaneous industry's yield of 0.15% and the S&P 500's yield of 1.91%.
In terms of dividend growth, the company's current annualized dividend of $1.14 is up 4.6% from last year. Mondelez has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 14.53%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Mondelez's current payout ratio is 45%. This means it paid out 45% of its trailing 12-month EPS as dividend.
MDLZ is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $2.55 per share, representing a year-over-year earnings growth rate of 3.24%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MDLZ 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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Mondelez International, Inc. (MDLZ) : Free Stock Analysis Report
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