All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
PolyOne in Focus
Headquartered in Avon Lake, PolyOne (POL) is a Basic Materials stock that has seen a price change of 22.24% so far this year. The maker of resins used in plastic pipe and other products is currently shelling out a dividend of $0.19 per share, with a dividend yield of 2.23%. This compares to the Chemical - Plastic industry's yield of 2.4% and the S&P 500's yield of 1.89%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.78 is up 8.3% from last year. Over the last 5 years, PolyOne has increased its dividend 5 times on a year-over-year basis for an average annual increase of 19.31%. 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, PolyOne's payout ratio is 32%, which means it paid out 32% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, POL expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.60 per share, with earnings expected to increase 7% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, POL 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
PolyOne Corporation (POL) : Free Stock Analysis Report
To read this article on Zacks.com click here.