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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Allstate in Focus
Allstate (ALL) is headquartered in Northbrook, and is in the Finance sector. The stock has seen a price change of -16.69% since the start of the year. Currently paying a dividend of $0.54 per share, the company has a dividend yield of 2.31%. In comparison, the Insurance - Property and Casualty industry's yield is 1.27%, while the S&P 500's yield is 1.64%.
Looking at dividend growth, the company's current annualized dividend of $2.16 is up 8% from last year. Allstate has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 13.96%. 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. Allstate's current payout ratio is 18%, meaning it paid out 18% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ALL for this fiscal year. The Zacks Consensus Estimate for 2020 is $11.34 per share, representing a year-over-year earnings growth rate of 8.72%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, ALL 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Allstate Corporation (ALL): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.