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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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Sun Life in Focus
Based in Toronto, Sun Life (SLF) is in the Finance sector, and so far this year, shares have seen a price change of 19.12%. Currently paying a dividend of $0.44 per share, the company has a dividend yield of 3.32%. In comparison, the Insurance - Life Insurance industry's yield is 0.46%, while the S&P 500's yield is 1.43%.
In terms of dividend growth, the company's current annualized dividend of $1.76 is up 7.8% from last year. In the past five-year period, Sun Life has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.42%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Sun Life's payout ratio is 39%, which means it paid out 39% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SLF for this fiscal year. The Zacks Consensus Estimate for 2021 is $4.70 per share, with earnings expected to increase 14.63% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. 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 is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Sun Life Financial Inc. (SLF) : Free Stock Analysis Report
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