Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Xilinx in Focus
Based in San Jose, Xilinx (XLNX) is in the Computer and Technology sector, and so far this year, shares have seen a price change of 5.34%. The computer chipmaker is paying out a dividend of $0.36 per share at the moment, with a dividend yield of 2.03% compared to the Semiconductors - Programmable Logic industry's yield of 2.02% and the S&P 500's yield of 1.79%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.44 is up 2.9% from last year. Xilinx has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.74%. 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. Xilinx's current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, XLNX expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $2.98 per share, representing a year-over-year earnings growth rate of 5.30%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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 XLNX 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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Xilinx, Inc. (XLNX) : Free Stock Analysis Report
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