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Why Whirlpool (WHR) is a Top Dividend Stock for Your Portfolio

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Zacks Equity Research
·3 min read
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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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Whirlpool in Focus

Whirlpool (WHR) is headquartered in Benton Harbor, and is in the Consumer Discretionary sector. The stock has seen a price change of 24.83% since the start of the year. The maker of Maytag, KitchenAid and other appliances is paying out a dividend of $1.25 per share at the moment, with a dividend yield of 2.22% compared to the Household Appliances industry's yield of 1.05% and the S&P 500's yield of 1.31%.

Looking at dividend growth, the company's current annualized dividend of $5 is up 3.1% from last year. Whirlpool has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.91%. 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. Whirlpool's current payout ratio is 27%, meaning it paid out 27% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, WHR expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $20.19 per share, representing a year-over-year earnings growth rate of 8.84%.

Bottom Line

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.

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, WHR is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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Zacks Investment Research