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.
Unitil in Focus
Unitil (UTL) is headquartered in Hampton, and is in the Utilities sector. The stock has seen a price change of 11.57% since the start of the year. The utility is currently shelling out a dividend of $0.39 per share, with a dividend yield of 3.04%. This compares to the Utility - Electric Power industry's yield of 3.11% and the S&P 500's yield of 1.65%.
In terms of dividend growth, the company's current annualized dividend of $1.56 is up 2.6% from last year. Over the last 5 years, Unitil has increased its dividend 5 times on a year-over-year basis for an average annual increase of 1.52%. 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. Right now, Unitil's payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for UTL for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.60 per share, with earnings expected to increase 10.64% 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. However, not all companies offer 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. With that in mind, UTL 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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