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.
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.
Aflac in Focus
Headquartered in Columbus, Aflac (AFL) is a Finance stock that has seen a price change of -6.05% so far this year. Currently paying a dividend of $0.42 per share, the company has a dividend yield of 2.49%. In comparison, the Insurance - Accident and Health industry's yield is 2.44%, while the S&P 500's yield is 1.74%.
Looking at dividend growth, the company's current annualized dividend of $1.68 is up 5% from last year. In the past five-year period, Aflac has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.72%. 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. Aflac's current payout ratio is 30%, meaning it paid out 30% of its trailing 12-month EPS as dividend.
AFL is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $5.74 per share, with earnings expected to increase 7.69% 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. It's important to keep in mind that not all companies provide 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, AFL 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).
Zacks Reveals ChatGPT "Sleeper" Stock
One little-known company is at the heart of an especially brilliant Artificial Intelligence sector. By 2030, the AI industry is predicted to have an internet and iPhone-scale economic impact of $15.7 Trillion.
As a service to readers, Zacks is providing a bonus report that names and explains this explosive growth stock and 4 other "must buys." Plus more.Download Free ChatGPT Stock Report Right Now >>
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.