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Why DHT Holdings (DHT) is a Great Dividend Stock Right Now

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

DHT Holdings in Focus

Headquartered in Hamilton, DHT Holdings (DHT) is a Transportation stock that has seen a price change of 27.14% so far this year. The independent oil tanker company is currently shelling out a dividend of $0.38 per share, with a dividend yield of 13.46%. This compares to the Transportation - Shipping industry's yield of 1.77% and the S&P 500's yield of 1.74%.

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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%. 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, 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, with earnings expected to increase 275.86% from the year ago period.

Bottom Line

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.

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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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