- Oops!Something went wrong.Please try again later.
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Texas Instruments in Focus
Headquartered in Dallas, Texas Instruments (TXN) is a Computer and Technology stock that has seen a price change of 17.28% so far this year. The chipmaker is currently shelling out a dividend of $1.02 per share, with a dividend yield of 2.12%. This compares to the Semiconductor - General industry's yield of 0.68% and the S&P 500's yield of 1.38%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.08 is up 9.7% from last year. Texas Instruments has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 18.90%. 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. Texas Instruments's current payout ratio is 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for TXN for this fiscal year. The Zacks Consensus Estimate for 2021 is $7.92 per share, which represents a year-over-year growth rate of 32.66%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that TXN is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
To read this article on Zacks.com click here.