Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 tha t dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Heidrick & Struggles in Focus
Heidrick & Struggles (HSII) is headquartered in Chicago, and is in the Business Services sector. The stock has seen a price change of -6.48% since the start of the year. The executive search firm is currently shelling out a dividend of $0.15 per share, with a dividend yield of 2.06%. This compares to the Staffing Firms industry's yield of 1.16% and the S&P 500's yield of 1.88%.
In terms of dividend growth, the company's current annualized dividend of $0.60 is up 15.4% from last year. Heidrick & Struggles has increased its dividend 1 times on a year-over-year basis over the last 5 years for an average annual increase of 1.56%. 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. Heidrick & Struggles's current payout ratio is 23%. This means it paid out 23% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for HSII for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.57 per share, which represents a year-over-year growth rate of 1.98%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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, HSII 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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