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.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Smucker in Focus
Based in Orrville, Smucker (SJM) is in the Consumer Staples sector, and so far this year, shares have seen a price change of 14.8%. Currently paying a dividend of $0.88 per share, the company has a dividend yield of 3.28%. In comparison, the Food - Miscellaneous industry's yield is 0.11%, while the S&P 500's yield is 1.9%.
In terms of dividend growth, the company's current annualized dividend of $3.52 is up 5.7% from last year. Over the last 5 years, Smucker has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.62%. 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. Smucker's current payout ratio is 42%. This means it paid out 42% of its trailing 12-month EPS as dividend.
SJM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $8.37 per share, with earnings expected to increase 0.97% 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.
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, SJM 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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The J. M. Smucker Company (SJM) : Free Stock Analysis Report
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