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.
Robert Half in Focus
Based in Menlo Park, Robert Half (RHI) is in the Business Services sector, and so far this year, shares have seen a price change of 8.57%. Currently paying a dividend of $0.31 per share, the company has a dividend yield of 2%. In comparison, the Staffing Firms industry's yield is 1.27%, while the S&P 500's yield is 1.9%.
Looking at dividend growth, the company's current annualized dividend of $1.24 is up 10.7% from last year. Robert Half has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 11.49%. 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. Robert Half's current payout ratio is 31%, meaning it paid out 31% of its trailing 12-month EPS as dividend.
RHI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.98 per share, with earnings expected to increase 10.25% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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, RHI 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
Robert Half International Inc. (RHI) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research