Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Southwest Gas in Focus
Based in Las Vegas, Southwest Gas (SWX) is in the Utilities sector, and so far this year, shares have seen a price change of 17.69%. Currently paying a dividend of $0.55 per share, the company has a dividend yield of 2.42%. In comparison, the Utility - Gas Distribution industry's yield is 2.73%, while the S&P 500's yield is 1.93%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.18 is up 6.1% from last year. In the past five-year period, Southwest Gas has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.09%. 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. Southwest Gas's current payout ratio is 58%. This means it paid out 58% of its trailing 12-month EPS as dividend.
SWX is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.91 per share, representing a year-over-year earnings growth rate of 6.25%.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, SWX 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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Southwest Gas Corporation (SWX) : Free Stock Analysis Report
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