Why PNM Resources (PNM) is a Top Dividend Stock for Your Portfolio
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
PNM Resources in Focus
PNM Resources (PNM) is headquartered in Albuquerque, and is in the Utilities sector. The stock has seen a price change of -10.29% since the start of the year. The power company is currently shelling out a dividend of $0.37 per share, with a dividend yield of 3.36%. This compares to the Utility - Electric Power industry's yield of 3.7% and the S&P 500's yield of 1.7%.
Looking at dividend growth, the company's current annualized dividend of $1.47 is up 5.8% from last year. Over the last 5 years, PNM Resources has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.67%. 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. PNM Resources's current payout ratio is 54%, meaning it paid out 54% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PNM expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $2.72 per share, with earnings expected to increase 1.12% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. 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 PNM 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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PNM Resources, Inc. (PNM) : Free Stock Analysis Report
