Sun Life (SLF) is a Top Dividend Stock Right Now: Should You Buy?

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.

Sun Life in Focus

Headquartered in Toronto, Sun Life (SLF) is a Finance stock that has seen a price change of 21.27% so far this year. The financial services company is paying out a dividend of $0.39 per share at the moment, with a dividend yield of 3.95% compared to the Insurance - Life Insurance industry's yield of 0.74% and the S&P 500's yield of 1.99%.

Looking at dividend growth, the company's current annualized dividend of $1.59 is up 7.5% from last year. In the past five-year period, Sun Life has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.91%. 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. Right now, Sun Life's payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.

SLF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.81 per share, which represents a year-over-year growth rate of 1.60%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. That said, they can take comfort from the fact that SLF is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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