All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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
Headquartered in Hartsville, Sonoco (SON) is an Industrial Products stock that has seen a price change of 20.5% so far this year. The packaging maker is currently shelling out a dividend of $0.41 per share, with a dividend yield of 2.56%. This compares to the Containers - Paper and Packaging industry's yield of 2.2% and the S&P 500's yield of 1.87%.
In terms of dividend growth, the company's 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 47%, which means it paid out 47% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SON for this fiscal year. The Zacks Consensus Estimate for 2019 is $3.58 per share, representing a year-over-year earnings growth rate of 6.23%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that SON 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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Sonoco Products Company (SON) : Free Stock Analysis Report
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