Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
WEC Energy Group in Focus
Based in Milwaukee, WEC Energy Group (WEC) is in the Utilities sector, and so far this year, shares have seen a price change of 3.97%. The electricity and natural gas provider is currently shelling out a dividend of $0.55 per share, with a dividend yield of 3.2%. This compares to the Utility - Electric Power industry's yield of 3.27% and the S&P 500's yield of 1.87%.
In terms of dividend growth, the company's current annualized dividend of $2.21 is up 6.3% from last year. In the past five-year period, WEC Energy Group has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.90%. 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. Right now, WEC Energy's payout ratio is 66%, which means it paid out 66% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for WEC for this fiscal year. The Zacks Consensus Estimate for 2018 is $3.32 per share, which represents a year-over-year growth rate of 5.73%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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 WEC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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WEC Energy Group, Inc. (WEC) : Free Stock Analysis Report
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