Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Eaton Vance in Focus
Eaton Vance (EV) is headquartered in Boston, and is in the Finance sector. The stock has seen a price change of -33.65% since the start of the year. The investment manager is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 4.84% compared to the Financial - Investment Management industry's yield of 3.66% and the S&P 500's yield of 2.5%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.50 is up 5.3% from last year. Over the last 5 years, Eaton Vance has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.94%. 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, Eaton Vance's payout ratio is 42%, which means it paid out 42% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, EV expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $3.51 per share, with earnings expected to increase 1.74% from the year ago period.
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, EV 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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