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.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
United Technologies in Focus
United Technologies (UTX) is headquartered in Farmington, and is in the Conglomerates sector. The stock has seen a price change of 15.04% since the start of the year. The maker of elevators, jet engines and other products is currently shelling out a dividend of $0.74 per share, with a dividend yield of 2.4%. This compares to the Diversified Operations industry's yield of 1.48% and the S&P 500's yield of 1.97%.
Looking at dividend growth, the company's current annualized dividend of $2.94 is up 3.7% from last year. Over the last 5 years, United Technologies has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.34%. 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. United Technologies's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
UTX is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $7.89 per share, with earnings expected to increase 3.68% from the year ago period.
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. 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 UTX is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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United Technologies Corporation (UTX) : Free Stock Analysis Report
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