Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.
DHT Holdings in Focus
DHT Holdings (DHT) is headquartered in Hamilton, and is in the Transportation sector. The stock has seen a price change of 24.77% since the start of the year. Currently paying a dividend of $0.04 per share, the company has a dividend yield of 13.72%. In comparison, the Transportation - Shipping industry's yield is 1.54%, while the S&P 500's yield is 1.57%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.52 is up 1166.7% from last year. In the past five-year period, DHT Holdings has increased its dividend 3 times on a year-over-year basis for an average annual increase of 1.87%. 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, DHT Holdings's payout ratio is 52%, which means it paid out 52% of its trailing 12-month EPS as dividend.
DHT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $1.09 per share, representing a year-over-year earnings growth rate of 275.86%.
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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, DHT 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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