- Oops!Something went wrong.Please try again later.
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
Travelers in Focus
Headquartered in New York, Travelers (TRV) is a Finance stock that has seen a price change of 4.15% so far this year. The insurer is currently shelling out a dividend of $0.85 per share, with a dividend yield of 2.33%. This compares to the Insurance - Property and Casualty industry's yield of 1.32% and the S&P 500's yield of 1.41%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.40 is up 0.9% from last year. Travelers has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.64%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Travelers's payout ratio is 33%, which means it paid out 33% of its trailing 12-month EPS as dividend.
TRV is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $11.59 per share, with earnings expected to increase 10.59% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. 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 TRV 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
The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report
To read this article on Zacks.com click here.