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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Spire in Focus
Headquartered in St Louis, Spire (SR) is a Utilities stock that has seen a price change of 12.07% so far this year. The natural gas distributor is paying out a dividend of $0.65 per share at the moment, with a dividend yield of 3.62% compared to the Utility - Gas Distribution industry's yield of 2.77% and the S&P 500's yield of 1.3%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.60 is up 4.4% from last year. In the past five-year period, Spire has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.94%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Spire's current payout ratio is 54%. This means it paid out 54% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SR for this fiscal year. The Zacks Consensus Estimate for 2021 is $4.34 per share, which represents a year-over-year growth rate of 15.43%.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, SR 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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Spire Inc. (SR) : Free Stock Analysis Report
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