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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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Spartan Stores in Focus
Headquartered in Grand Rapids, Spartan Stores (SPTN) is a Retail-Wholesale stock that has seen a price change of 33.08% so far this year. The grocery store operator and grocery distributor is paying out a dividend of $0.21 per share at the moment, with a dividend yield of 2.45% compared to the Food - Natural Foods Products industry's yield of 0.91% and the S&P 500's yield of 1.51%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.84 is up 5% from last year. In the past five-year period, Spartan Stores has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.44%. 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. Spartan Stores's current payout ratio is 47%, meaning it paid out 47% of its trailing 12-month EPS as dividend.
SPTN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $2.12 per share, representing a year-over-year earnings growth rate of 24.71%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, SPTN presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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SpartanNash Company (SPTN) : Free Stock Analysis Report
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