All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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 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.
Sonoco in Focus
Based in Hartsville, Sonoco (SON) is in the Industrial Products sector, and so far this year, shares have seen a price change of 14.72%. Currently paying a dividend of $0.41 per share, the company has a dividend yield of 2.69%. In comparison, the Containers - Paper and Packaging industry's yield is 2.28%, while the S&P 500's yield is 1.89%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.64 is up 1.2% from last year. Over the last 5 years, Sonoco has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.98%. 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. Right now, Sonoco's payout ratio is 49%, which means it paid out 49% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, SON expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.52 per share, which represents a year-over-year growth rate of 4.45%.
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, SON 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).
Is your investment advisor fumbling your financial future?
See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.” Click to get your free report.
Sonoco Products Company (SON) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research